For a change, economy showing positive signs

WASHINGTON -- A weak economy got a little lift Thursday with new data suggesting companies aren't pursuing mass layoffs and stores are a little busier.

New applications for unemployment benefits declined for a second straight week after rising in the previous three. Retailers reported strong sales in August. And more people signed contracts to buy homes.

Economists were mildly encouraged by the news, which followed several downbeat reports on housing and weaker economic growth last week. But few saw signs that the economy is gaining momentum.

"It's encouraging that we're not seeing further deterioration as we have in recent months," said Julia Coronado, U.S. economist at BNP Paribas. "But we're not turning around and moving in the direction of stronger growth."

New claims for unemployment aid fell last week by 6,000 to a seasonally adjusted 472,000, the Labor Department said Thursday. The four-week average of claims, a less-volatile measure, fell by 2,500 to 485,500, its first decrease after four straight increases.

Even with the declines, claims are still at much higher levels than they would be in a healthy economy. When economic output is growing rapidly and employers are hiring, claims generally drop below 400,000.

It appears "that a wave of panicked layoffs has passed, as companies have become a bit calmer in the face of the financial and economic disruptions of late spring and early summer," Pierre Ellis, an economist at Decision Economics, wrote in a note to clients.

In a separate report, the Labor Department said productivity fell in the spring by the largest amount in nearly four years while labor costs rose. That indicates companies may have reached the limits of their ability to squeeze more work out of their reduced work forces.

The nation's retailers reported solid gains for August. Aggressive discounting helped during an unusually hot summer when consumers worried about jobs and a weakening economy.

And the number of buyers who signed contracts to purchase previously occupied homes increased in July, according to the National Association of Realtors. But it remained well below last year's levels, a sign that demand for housing remains weak.

The modest increase in home sales comes as mortgage rates keep falling. The average 30-year mortgage dropped to 4.32 percent this week, down from 4.36 percent last week, according to mortgage buyer Freddie Mac. That's the 10th time in the past 11 weeks that rates have hit their have lowest level since Freddie Mac began tracking them in 1971.

In another report, factory orders rose slightly in July after two months of declines. But most of the gains were a result of higher airplane orders. Excluding transportation, orders fell 1.5 percent, the biggest drop in 16 months.