Factory output in the U.S. Mid-Atlantic region shrank in July marking the third month in a row of declining activity. Additionally, the number of Americans filing new claims for jobless aid surged last week, raising new concerns about the economy.
Also, on Thursday, a report showing home resales slumped to their lowest level in eight months during June does not bode well for the economy; all the mentioned measures are gauges of future economic activity, according to a Reuters report.
"These reports affirm the narrative of slowing economic growth momentum," said Millan Mulraine, senior macro strategist at TD Securities in New York.
"While we believe that economic conditions have not deteriorated sufficiently to push the Federal Reserve over the edge, the odds of further policy action being taken in the near-term have clearly risen."
The Obama administration and Democrats want to raise taxes on those making $250,000 per year or more, which many feel will cut deeper into lackluster job creation. Adding to concerns, Democrats have vowed to allow all Bush tax cuts to expire if the Republican Party does not agree to their tax increases on small businesses and higher earners. This action, by Democrats, could set the stage for huge tax increases should all of the Bush tax cuts expire.
Troubles from the debt crisis in Europe have also culminated in slower job growth, weak consumer spending and manufacturing output. Meanwhile, Greece and Spain are teetering on insolvency and waiting for bailouts from Germany and other nations.
The Philadelphia Federal Reserve said its business activity index was minus 12.9 from minus 16.6 in June. A reading below zero indicates contraction in the region's manufacturing.
"There is underlying softness in manufacturing. It probably understates the broader activity throughout the nation, but it still goes to show you that the weak trends are persisting," said Sean Incremona an economist at 4CAST in New York.
A second report from the Labor Department showed initial claims for state unemployment benefits rebounded 34,000 to a seasonally adjusted 386,000.
The four-week moving average for new claims that measures labor market trends fell 1,500 to 375,500 - staying in the range it has held for much of 2012.
Some say the most disappointing news was from the housing sector, which has been in a moderate upswing recently. However home resales dropped 5.4 percent to an annual rate of 4.37 million units in June, according to the National Association of Realtors.
The good news is that the median sales price rose from last year and there were fewer sales of distressed properties.
July, because of the timing of the annual auto plant shutdowns for retooling, does not hold promise for an increase in economic activity. However automakers have not shutdown as many facilities this year, which skews the patterns of economic activity.
Nevertheless, last week's unemployment claims data covers the period for July payrolls. The four-week average of new claims dropped 12,000 between the June and July survey periods, suggesting a marginal improvement in nonfarm payrolls.
The labor market reported three months of sub-100,000 job growth and a total of 5.75 million people were claiming unemployment benefits during the week ending June.