US Jobless Claims and Weak Manufacturing Signal QE3 was Needed

Manufacturing closed out its weakest quarter in three years this month and the number of Americans filing new claims for jobless benefits held near two-month highs last week, suggesting the economic recovery is failing to gain traction.

Financial information firm Markit said its U.S. “flash”, or preliminary, manufacturing Purchasing Managers Index stood at 51.5 in September, unchanged from August. A reading above 50 indicates expansion.

The index averaged 51.5 in the third quarter, below the 54.2 registered between April and June, for its worst showing since the third quarter of 2009. At 51.2, the output component was the lowest since September 2009.

“With output growing at the slowest pace since the recovery began, the manufacturing sector may have even acted as a slight drag on the economy in the third quarter,” Markit chief economist Chris Williamson said.

After growing at a 1.7 percent annual pace between April and June, the economy likely slipped “closer towards stagnation” between July and September, he added.

A separate report from the U.S. Labor Department showed initial claims for state unemployment aid edged down just 3,000 to a seasonally adjusted 382,000 last week

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza