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Ecomony burdened by sluggish job market; Jobless applications hit 6-month high

The sluggish job market is weighing on the U.S. economy three years after the Great Recession ended. And the signs suggest hiring may not strengthen any time soon.

A measure of the number of people applying for unemployment benefits over the past month has reached a six-month high, the government said Thursday. The increase suggests that layoffs are rising and June will be another tepid month for hiring.

Sales of previously occupied homes fell in May. And manufacturing activity in the Philadelphia region contracted for the second straight month in June.

The gloomy economic data echoed a more pessimistic outlook from the Federal Reserve issued Wednesday.

The reports also contributed to a sharp decline in stock prices. The Dow Jones industrial average fell 251 points to close at 12,574. The Standard & Poor's 500 index and the Nasdaq composite both ended the day down more than 2 percent.

"It appears the slow-growth expansion will be slower," said John Silvia, chief economist at Wells Fargo Securities, in a note to clients.

Thursday's raft of economic reports showed:

*Applications for unemployment benefits dipped last week to 387,000, from an upwardly revised 389,000 the previous week, the Labor Department said. The four-week average, a less volatile measure, rose to 386,250. That is the highest level since December. When applications for unemployment benefits top 375,000, hiring generally remains too weak to rapidly lower the unemployment rate.

*The Philadelphia Federal Reserve Bank said its index of regional manufacturing activity fell sharply to -16.6 from -5.8. That's the lowest level in nearly a year. A reading below zero indicates contraction. Measures of new orders and shipments also plummeted.

*A gauge of future U.S. economic activity rose in May to its highest level in four years, one of the few positive signs Thursday. The Conference Board's index of leading economic indicators increased to 95.8. That's the highest level since June 2008, which was six months into the recession. Still, before the recession, the index routinely topped 100.

The generally bleak news came a day after the Fed downgraded its outlook for growth and took another step to try and jolt the economy.

The Fed now expects growth of just 1.9 percent to 2.4 percent for the year. That's half a percentage point lower than its previous estimate in April. And it thinks the unemployment rate, now 8.2 percent, won't fall much further in 2012.

To try to boost growth and hiring, the Fed said it would extend a program intended to drive down long-term U.S. interest rates. Fed Chairman Ben Bernanke hopes that will encourage more borrowing and spending.

Hiring slowed sharply in April and May, raising concerns about the strength of the recovery. Employers have added an average of only 73,000 jobs a month in April and May. That's much lower than the average of 226,000 added in the first three months of this year.

The weaker manufacturing activity in the Philadelphia region likely reflects the worsening debt crisis in Europe, which has dampened demand for U.S. exports.

Despite the plunge in the survey, companies said they're more optimistic about business conditions in the six months. A gauge of future expectations rose to 19.5 in June from 15 the previous month.

Economists cautioned that the Philly Fed index is volatile and does not always reflect the state of manufacturing nationwide.

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