U.S. Factory Orders Fell 0.5 Percent in June

By MARTIN CRUTSINGER, Associated Press

WASHINGTON (AP) — Companies placed fewer orders with U.S. factories in June from May, signaling further weakness with manufacturing.

The Commerce Department said Thursday that factory orders fell 0.5 percent in June, the third decline in four months.

Orders for core capital goods, considered a good proxy for business investment, dropped 1.7 percent. Demand fell for heavy machinery and computers.

Manufacturing has been a key source of growth in the U.S. since the recession ended in June 2009. But in recent months, factory activity has weakened along with the broader economy.

[READ: U.S. Manufacturing Sector Shrank For Second Month.]

U.S. factory orders in June totaled $465.8 billion, up 42.5 percent from the recession low hit in March 2009.

Demand for long-lasting goods, items such as autos and airplanes, increased 1.3 percent in June. Demand for non-durable goods such as petroleum products, fell 2 percent.

Job growth has slumped since March, leading U.S. consumers and businesses to cut back on spending, That has lowered demand for factory goods. Europe's economic woes and slower growth in China, India and Brazil have also reduced demand for American exports.

The weaker economy is affecting factories. U.S. manufacturing shrank for the second straight month in July, according to a survey by a trade group of purchasing managers.

Overall economic growth slowed to an annual rate of just 1.5 percent in the April-June quarter, down from an already lackluster 2 percent growth rate in the January-March quarter.

The economy isn't growing fast enough to lower the unemployment rate.

The Labor Department reports on July unemployment and job growth Friday. Economists predict employers added 100,000 jobs last month. That would be slightly better than the 75,000 a month average from April through June but still below the healthy 226,000 average in the first three months of the year. The unemployment rate is expected to stay at 8.2 percent.

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The Federal Reserve cited the weaker growth in a statement Wednesday in which Fed officials repeated a pledge to try to boost growth in hiring remains weak. The Fed statement noted that growth has slowed in the first half of the year with job creating slackening and consumer spending tapering off.

Many economists believe the Fed will launch another round of bond buying at its September meeting in an effort to give the economy a boost by pushing long-term interest rates lower.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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U.S. Rate On 30-Year Mortgage Rises to 3.55 Percent

Homes are seen in the Lago Vista area of south San Antonio.

By MARCY GORDON, Associated Press

WASHINGTON (AP) — The average U.S. rate on the 30-year fixed mortgage rose this week after falling to new record lows in each of the past 13 weeks.

Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan jumped to 3.55 percent. That's up from 3.49 percent last week, which was the lowest since long-term mortgages began in the 1950s.

The average rate on the 15-year fixed mortgage, a popular refinancing option, increased to 2.83 percent. That's above last week's record low of 2.80 percent.

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Cheaper mortgage rates have helped drive a modest but uneven housing recovery this year. Sales of new and previously occupied homes fell in June from May but were higher than the same month last year. Home prices have started to rise in a majority of cities.

Builders are also more confident after seeing more demand for homes. In June, they increased their spending for a third straight month.

Low mortgage rates could also provide some help to the economy if more people refinance. When people refinance at lower rates, they pay less interest on their loans and have more money to spend. Many homeowners use the savings on renovations, furniture, appliances and other improvements, which help drive growth.

Still, the pace of home sales remains well below healthy levels. Many people are still having difficulty qualifying for home loans or can't afford larger down payments required by banks.

The sluggish job market could deter some from making a purchase this year. The Labor Department reports Friday on July unemployment and job growth.

The Federal Reserve said Wednesday that the economy is losing strength and repeated a pledge to take further steps if the job market doesn't show sustained improvement.

The Fed took no new action after its two-day meeting. But it acknowledged that economic activity had slowed over the first half of the year, unemployment remains elevated and consumer spending has weakened.

[READ: Don't Pay Off Your Mortgage If This Describes You.]

Mortgage rates have been dropping because they tend to track the yield on the 10-year Treasury note. A weaker U.S. economy and uncertainty about how Europe will resolve its debt crisis have led investors to buy more Treasury securities, which are considered safe investments. As demand for Treasurys increase, the yield falls.

To calculate average rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week.

The average does not include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for 30-year loans was 0.7 point, unchanged from last week. The fee for 15-year loans slipped to 0.6 point from 0.7 the previous week.

The average rate on one-year adjustable rate mortgages fell to 2.70 percent from 2.71 percent. The fee for one-year adjustable rate loans declined to 0.4 point from 0.5 point.

The average rate on five-year adjustable rate mortgages rose to 2.75 percent from 2.74 percent last week. The fee was unchanged at 0.6.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Home Prices Rise 2.2 Percent in May

A tightening supply of homes for sale coupled with stronger buyer demand has put upward pressure on home prices.

Bringing to an end a painfully long streak of declines, home prices rose for the second straight month in May with no cities posting new lows, according to Standard & Poor's Case-Shiller home price indexes.

Average home prices increased 2.2 percent in May over April numbers, according to the report released Tuesday, cementing the notion that the housing market is slowly healing. Prices in April rose 1.3 percent, after falling for seven consecutive months.

"May was a good month for housing with existing home sales almost 10 percent higher than year-ago levels, supply shortages in some markets, and a declining mix of foreclosure re-sales which particularly affect the Case-Shiller index," Stan Humphries, chief economist at Zillow, wrote in an E-mail.

[Read: Why Homeownership Is Stalling Even As Home Sales Improve.]

"Overall we remain cautiously optimistic that home values are at a bottom nationally even while our expectations for price appreciation in the next couple of years are muted," he added.

A tightening supply of homes for sale coupled with stronger buyer demand has put upward pressure on home prices, according to experts. Rock-bottom mortgage rates, slightly looser credit availability, and improving job growth have also nudged more house-hunters from window-shopping to the contract table.

Still, prices overall are down more than 30 percent from their peak in 2006 and experts caution that more monthly price declines could be on the way, primarily because spring and summer tend to be strong buying months.

According to the chairman of S&P's index committee David Blitzer, the current upward trend in prices must continue through summer into fall to really signal the housing market has found its footing.

"The housing market seems to be stabilizing," he said in a release Tuesday. "But we are definitely in a wait-and-see mode for the next few months."

Meg Handley is a business reporter for U.S. News & World Report. You can reach her at mhandley@usnews.com and follow her on Twitter.

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Hiring Increases, But Jobless Rate Inches Up to 8.3 Percent

Business employment specialist Linda Reynolds helps job searcher D'Andre Preston at WorkSource Oregon on July 17, 2012, in Tualatin, Ore.

The national unemployment rate inched up slightly to 8.3 percent for the month of July, according to the latest monthly jobs report from the Labor Department.

[See why a better economy may not fix the jobs problem.]

Though the headline number ticked upward, the economy also added far more jobs than expected, with 163,000 new jobs last month—the most in five months. Economists surveyed by Bloomberg, for example, had predicted a bump of 100,000 jobs.

Still, a stubbornly high unemployment figure is a troubling sign. Job troubles have recently been far-reaching, with no particular industry showing encouraging growth, says Brad Sorensen, Director of Market and Sector Research at Schwab.

"I don't know that there's any specific industry that is looking particularly strong at this point in time, unfortunately," he says. Likewise, he adds there aren't industries that are looking particularly abysmal. "There are pockets, but really, in general, it's really just broad-based."

According to the figures, professional and business services added 49,000 jobs last month, with education and health services adding 38,000 and leisure and hospitality growing by 27,000 jobs. Manufacturing also posted solid growth, at 25,000 jobs.

Meanwhile, government and construction saw declines, losing 9,000 and 1,000 jobs, respectively.

Still, there may be hopes for a boost in construction jobs. Recent improvements in home prices provide some encouragement that this industry hit hard by the recession will be able to boost employment soon.

[See what stores are growing the most.]

"We have seen housing start to improve," says Sorensen. "And it's not going to be a quick improvement or a really sharp improvement. [But] we have seen new home sales start to improve, and that should lead to new homes starting to be built."

A recovery in housing, of course, would not only boost construction jobs but could provide some of the momentum the economy needs to start adding enough jobs consistently to bring the unemployment rate down.

Still, drags on the economy remain, in the form of an ever-present European debt crisis and an impending "fiscal cliff" as Bush-era tax cuts expire and mandated spending cuts kick in if Congress fails to act by January. Many businesses cite uncertainty over what will happen as a reason for the slow pace of hiring this summer.

Because it comes after the Great Recession and amidst an excruciatingly slow recovery, the lead-up to the cliff may not in fact cause many job losses; rather, it will just mean that uncertain employers will be leery of adding very many new workers to their payrolls, says one expert.

"When people leave [their jobs] today, they have to be replaced. Companies are as lean as they possibly can be right now," says Dave Campeas, president and CEO of recruitment services firm PrincetonOne. While companies may not add lots of new positions in the coming months, he says, they also may be hard-pressed to eliminate positions.

[Read: Is QE3 coming in September?]

Still, the nearly 12.8 million unemployed Americans would surely like to see employers doing more. The key, according to Brian Hamilton, CEO of financial information company Sageworks, is Washington tackling its deficit problems.

"Everybody knows that too much spending is the big problem – so big that no one wants to face it," he says. "But the lingering effect of not doing anything is that everyone is nervous. And when consumers and businesses are skittish about spending, companies throughout the U.S. will remain too nervous to hire."

Danielle Kurtzleben is a business and economics reporter for U.S. News & World Report. Connect with her on Twitter at @titonka or via E-mail at dkurtzleben@usnews.com.

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