Economic News Offers Mixed Signals

Unemployment, construction and manufacturing numbers released today send mixed messages about how the economy is faring.

The unemployment rate fell for the first time in eight months, according to a report from the Labor Department, and construction spending hit an all-time high. But a key gauge of industrial activity fell.
The jobless rate eased to 4.4 percent from 4.5 percent in April, despite economists' projections that unemployment would be higher. The last time the unemployment rate fell was last September.
However, the number of workers on U.S. payrolls outside the farm sector fell by 19,000. The modest drop is close to the 17,000 number expected by economists in a Reuters survey.
Employment numbers are typically a lagging economic indicator. They may well be at their worst several months after the economy begins to improve steadily.
U.S. construction spending hit another record high. Construction numbers posted a modest rise in April for the sixth month in a row: 0.3 percent, to a record $855.2 billion annual rate. This was slightly above analyst's projections, who expected the construction numbers to be unchanged. Compared with a year ago, construction spending rose 4.8 percent.
Residential spending provided much of the boost, rising 0.7 percent. The home building sector has remained relatively strong because of low mortgage interest rates. However, construction of nonresidential buildings dropped 0.9 percent. Nevertheless, nonresidential construction was still up 9.3 percent from a year ago.
Meanwhile, the National Association of Purchasing Management announced its monthly gauge of industrial activity fell in May to 42.1 from 43.2 in April. However, that number is still above the 10-year-low of 41.2 in January.
A reading under 50 signals contracting manufacturing activity, which makes up about 20 percent of the U.S. economy. The NAPM index has held under 50 for 10 months, but a small improvement since January had boosted hopes that production could recover as companies cut their large inventories and new orders picked up.