Yesterday it was the Empire State manufacturing index that turned unexpectedly negative.  Today, it’s the Philadelphia Fed’s manufacturing index that dropped into the red … “unexpectedly.”  The report comes amid decidedly mixed economic signals today:

Factory activity in the U.S. Mid-Atlantic region unexpectedly shrank in June in another sign of weakness in the manufacturing sector, a survey showed on Thursday.

The Philadelphia Federal Reserve Bank said its business activity index fell to minus 7.7 in June from positive 3.9 the month before. It fell far short of economists’ expectations for a rise to 6.8, according to a Reuters poll. It was the lowest level since July 2009.

The new orders index also fell, coming in at minus 7.6 from 5.4 in May, while inventories dropped to minus 8.5 from minus 5.4. New orders were at their lowest since June 2009.

As Reuters reports, anything below a zero in both reports indicates contraction in the manufacturing sector.  The drop in orders portends further contraction during the summer, which will certainly not help job creation.  If the trend continues, manufacturing could start shedding jobs — especially since inventories are hitting record levels already.  Slack demand and overstocking leads fairly logically to curtailed manufacturing, and this is merely the consequence of a long series of reversals in the economy.

Other news was a little more optimistic, but only in comparison to starkly bad previous results.  Reuters gives it the best possible spin:

The number of Americans signing up for jobless benefits fell last week, while housing starts and building permits rose in May, offering some hope the economy could be starting to pull out of its soft patch.

Initial claims for state unemployment insurance slipped 16,000 to 414,000, the Labor Department said on Thursday, suggesting the jobs market was regaining some momentum after stumbling badly in May.

A separate report from the Commerce Department showed groundbreaking for homes rose 3.5 percent to an annual rate of 560,000 units, retracing almost half of April’s steep decline. New building permits unexpectedly rebounded 8.7 percent to the highest level since December.

The reports offered at least a hint the economic slowdown that started as the year began could be easing.

Actually, the dip in the initial jobless claims falls within the ~420K range we’ve been seeing for the past 10 weeks.  The difference is so slight that it doesn’t indicate anything by itself.  The negative manufacturing numbers are a better predictor of future hiring and termination than this, which is more or less statistical noise.

The news from the housing market is better than the weekly claims number, but as Reuters reports, it’s basically a small rebound from the bottom.  That’s better than going further down, of course, and both housing numbers show some optimism in the construction market.  Completions in May were only up 0.4%, however, and still 22.5% below the May 2010 rate.  The annualized rate of single-family housing starts (419K) in May is still the third-lowest in a year, ahead of only April and March of this year.  Residential housing under construction actually declined in May by 0.2%, and among single-family homes by 0.8%.

If we’re looking into crystal balls, the manufacturing numbers should be looming largest — and looking decidedly pessimistic for short-term economic growth.  We may count ourselves lucky in Q2 if we haven’t fallen into negative GDP growth numbers, as we certainly will if these trends continue.