Manufacturing closed out its weakest quarter in three years this month and the number of Americans filing new claims for jobless benefits held near two-month highs last week, suggesting the economic recovery is failing to gain traction.

Other reports on Thursday suggested the economy's weakness could prove protracted, with factory activity in the Mid-Atlantic contracting for a fifth straight month in September and a measure of future economic activity dipping in August.

"I don't think the economy is going anywhere fast," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania. "The jobs market is still very difficult and manufacturing, which was a key pillar of the recovery is beginning to crack."

The economy grew at a sluggish 1.7 percent annual rate in the second quarter, and economists said growth this quarter was unlikely to have picked up much -- particularly with factory activity showing fatigue.

Financial information firm Markit said its U.S. "flash," or preliminary, manufacturing Purchasing Managers Index stood at 51.5 in September, unchanged from August. A reading above 50 indicates expansion.

The index averaged 51.5 in the third quarter, below the 54.2 registered between April and June, for its worst showing since the third quarter of 2009. At 51.2, the output component was the lowest since September 2009.

"With output growing at the slowest pace since the recovery began, the manufacturing sector may have even acted as a slight drag on the economy in the third quarter," Markit chief economist Chris Williamson said.

A separate report from the Labor Department showed initial claims for state unemployment aid edged down just 3,000 to a seasonally adjusted 382,000 last week.

Economists had attributed a spike in claims in the prior week to Tropical Storm Isaac, but the minimal improvement in the latest reading pointed to fundamental weakness.

The four-week moving average for new claims, a better measure of labor market trends, rose for a fifth straight week to its highest level since June.

The uninspiring US data and signs of increasing economic weakness in China and Europe pushed US stocks lower. Prices for US government debt rose, while the dollar gained versus a basket of currencies.

Lackluster labor market conditions prompted the Federal Reserve last week to launch an aggressive stimulus program. It vowed to buy $40 billion worth of mortgage-backed securities each month until it sees a sustained upturn on the jobs front.

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Editor's Note: Thinking back to 2007-2008, gas prices were lower and, although the job market was sluggish, the big economic slam came almost exclusively from the behemoth banking sector where the repercussions from paper-pusher investments and a socially engineered mortgage collapse were beginning to be felt. Since then, the Obama Administration has bungled each and every attempt to right the economic ship of the United States, adding to the debt by trillions; supporting dysfunctionally structured companies with bailouts when they should have been forced to re-structure under bankruptcy laws (including the renegotiation of union contracts and pensions), and granting taxpayer monies to crony private sector eco-zealots. Which brings the question, just how bad was the economy that Mr. Obama "inherited," and how much worse have his actions made it?


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