WASHINGTON (AP) - The economy appears slightly healthier than many had feared it was a few weeks ago, raising hopes that it can end the year on an upward slope.
A raft of data Thursday show layoffs are trending down to a six-month low and factories in the Mid-Atlantic are growing again after contracting for two months. Nevertheless, home sales fell and the housing market is expected weigh on the economy deep into 2012.
The outlook for the final six months of the year has improved from August, when many thought the economy was at growing risk of falling back into a recession. Other recent reports showed hiring picked up slightly in September and consumers boosted their spending on retail goods by the most since March.
Most economists now expect modest growth for the rest of this year. Still, they caution that it's unlikely to be strong enough to significantly lower the unemployment rate, which has been stuck near 9 percent for more than two years. And a recession in Europe, which many now predict, could slow growth in 2012.
Macroeconomic Advisers forecasts the economy will expand at an annual rate of 2.7 percent in the July-September quarter, and 2.6 percent in the final three months of the year. The government issues its first estimate for third-quarter growth on October 27.
"A recession now looks a lot less likely, but economic growth is still going to be pretty weak," said Paul Ashworth, an economist at Capital Economics.
Reports Thursday were mostly positive:
- The average number of people applying for unemployment benefits each week over the past four weeks fell to 403,000, the Labor Department said. That's the lowest level for the four-week average since mid-April. A month ago, it was 422,250.
- Manufacturing grew in the Philadelphia region in October after contracting for two straight months, the Federal Reserve Bank of Philadelphia said. The October reading was the best for the Philly Fed's regional manufacturing index in six months.
- The Conference Board index of leading economic indicators rose 0.2 percent in September. It was the fifth consecutive gain for the index, although it was slightly weaker than increases in August and July.
The financial markets rose in morning trading after the Philly Fed report was released. They gave up most of their early gains after reports showed Europe is struggling to agree on a plan to address the region's debt crisis. The Dow Jones industrial average rose 12 points in afternoon trading.
Economists have been closely watching unemployment benefit applications since fears of another recession intensified this summer. Layoffs and applications tend to rise at the beginning of recessions.
"This decline in initial claims signals the potential for an improvement in the pace of job creation in October relative to recent months," said John Ryding, an economist with RDQ Economics. "However, we are still waiting for that decisive move in claims below the 400,000 mark to send a stronger signal that payroll growth is running at a pace that will begin to make sustained inroads into unemployment."
Job growth is critical to a housing recovery, which many economists say could be years away.
The number of Americans who bought previously occupied homes fell to a seasonally adjusted annual rate of 4.91 million homes, the National Association of Realtors said. The pace matches last year's sales figures, which were the worst since 1997.
Economists say home sales need to be closer to 6 million to be consistent with a healthy housing market.