The number of Americans filing for unemployment benefits dropped to a more than 48-1/2-year low last week as the labor market strengthens further, but trade tensions are casting a shadow over the economy’s outlook. Other data on Thursday showed manufacturing activity in the mid-Atlantic region accelerated in July amid a surge in orders received by factories. But the Philadelphia Federal Reserve survey also showed manufacturers paying more for inputs and less upbeat about business conditions over the next six months. Fewer manufacturers planned to increase capital spending, suggesting trade tensions, marked by tit-for-tat import tariffs between the United States and its trade partners, including China, Canada, Mexico and the European Union, could be starting to hurt business sentiment. The survey came on the heels of the Federal Reserve’s Beige Book report on Wednesday, showing manufacturers in all districts worried about the tariffs and reporting higher prices and supply disruptions, which they blamed on the new trade policies. “Yesterday’s Beige Book and the recent decline in the investment intentions balance in the Philly Fed survey show that escalating trade tensions are starting to have a material impact on companies’ confidence about the future,” said Brian Coulton, chief economist at ratings agency Fitch. Initial claims for state unemployment benefits dropped 8,000 to a seasonally adjusted 207,000 for the week ended July 14, the lowest reading since early December 1969, the Labor Department said. Economists polled by Reuters had forecast claims rising to 220,000 in the latest week. The second straight weekly decline in claims, however, likely reflects difficulties adjusting the data for seasonal fluctuations around this time of the year when motor vehicle manufacturers shut assembly lines for annual retooling. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 2,750 to 220,500 last week. The dollar firmed against a basket of currencies. Stocks on Wall Street were lower, while prices for US Treasuries rose. Worker Shortage The claims data covered the survey week for the nonfarm payrolls component of July’s employment report. The four-week average of claims dipped 500 between the June and July survey periods, suggesting solid job growth this month. The economy created 213,000 jobs in June, with the unemployment rate rising two-tenths of a percentage point to 4.0 percent as more Americans entered the labor force, in a sign of confidence in their job prospects. Federal Reserve Chairman Jerome Powell told lawmakers this week that with appropriate monetary policy, the job market will remain strong “over the next several years.” The labor market is viewed as being near or at full employment. There were 6.6 million unfilled jobs in May, an indication that companies cannot find qualified workers. That was reinforced by the Beige Book, which showed worker shortages persisting in early July across a wide range of occupations, including highly skilled engineers, specialized construction and manufacturing workers, information technology professionals and truck drivers. Thursday’s survey from the Philadelphia Fed showed its business conditions index jumped to a reading of 25.7 in July from 19.9 in June. The survey’s measure of new orders increased to 31.4 from a reading of 17.9 in June. Published in Daily Times, July 21st 2018.