Factory Orders Up 0.5% Last Month

U.S. factory orders rose in October as demand increased for military hardware and non-durable goods, while two Labor Department reports Thursday were at odds on the health of the job market.

The 0.5% rise in bookings at manufacturers followed no change in September, the Commerce Department said. October’s increase was bigger than most economists had expected.

Initial jobless claims rose last week by 25,000 to 349,000, a rise that may be overstated because of difficulties adjusting the data for the Thanksgiving holiday. The closely watched four-week moving average, which smooths weekly fluctuations to provide a clearer picture of underlying trends, also rose, climbing to 336,500 from a four-year low of 332,250 in the previous week.

In a second report, the Labor Department said the total number of employment benefit applications, including continuing claims, fell in the week that ended Nov. 20 to 2.723 million, the lowest level since April 2001. The decline suggests more people are finding jobs.

The government is expected to report today that employers added about 200,000 workers to their payrolls last month, bringing to more than 1 million the number of new jobs created since June.

Excluding defense equipment, factory orders were unchanged in October, according to the Commerce Department.

Orders for non-durable goods, which include industrial chemicals, drugs, papers and textiles, climbed 2.4%, the most since March, after dropping 1.1% the prior month.

The jump in the value of bookings may reflect rising prices for oil and other commodities. Orders for petroleum and coal products surged 8% in October, while drugs jumped 8.6%, according to the report.

Durable-good orders, which account for more than half the total, fell 1.1%, the biggest drop since April, led by slow demand for cars and computers. A preliminary report last week had the orders falling 0.4% after a 1% gain in September.

Orders for capital goods excluding aircraft, a proxy for future business investment, fell 4.2% after a 5.4% September increase. Shipments of such goods, which the government uses to calculate figures on gross domestic product, rose 2% after a 0.3% decline.

“The shipments numbers have clearly been strong and more consistent with a growing economy,” said Ken Mayland, president of ClearView Economics in Ohio.

Factory inventories rose 0.5% in October after a 0.1% increase. The inventory-to-shipments ratio held at 1.24 months. The figure compares with a record low 1.22 months reached in March.

Some businesses are replacing outdated equipment to take advantage of tax incentives that expire this month. Under a provision in the tax law that President Bush signed in May 2003, large companies can write off 50% of qualified investments as long as the equipment is delivered by the end of the year.