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Economy runs neither hot nor cold, but not just right, either

The economy tossed up more mixed signals Thursday, continuing a pattern of lukewarm performance that could play into the hands of the Republicans as they assail President Barack Obama's record on the economy.

While consumer spending took its biggest jump in five months as the third quarter got started in July, jobs remained a dark cloud. New claims for unemployment benefits were flat in the latest week, suggesting that hiring is still struggling to pick up momentum.

Recent data on housing and retail sales suggest the economy fared better early in the third quarter but was not strong enough to take additional monetary easing by the Federal Reserve off the table.

"The economy does not seem to be faltering or going into reverse," said Chris Rupkey, an economist with Bank of Tokyo-Mitsubishi in New York. "But for a Fed that thinks the economy is not good enough, the economic data today is not consistent with 3 percent-plus growth or a falling unemployment rate."

Thursday's reports on the economy came as former Massachusetts Gov. Mitt Romney was getting set to accept the Republican Party's official nomination at the convention in Tampa, Fla., Thursday night. Romney has been touting his business experience as he tries to unseat Obama in the White House.

Related story: Ryan accepts VP nod: 'Let's get this done'

The Labor Department reported that seasonally adjusted initial claims for unemployment benefits were an unchanged 374,000, higher than the 370,000 that economists had expected. The four-week moving average, which smooths out wrinkles in the data, rose 1,500 to 370,250.

Jobless claims have risen by 10,000 in August, suggesting some moderation in the pace of job growth this month after payrolls increased 163,000 in July after a slim 64,000 gain in June.

The state of the labor market, particularly the unemployment rate, could determine whether the Federal Reserve will offer additional monetary stimulus to the economy at its Sept. 12-13 policy meeting. Economists are divided on whether the Fed will announce a third round of bond purchases to spur faster economic growth.

The unemployment rate, which ticked up to 8.3 percent in July, has been stuck above 8 percent for more than three years, the first time this has happened since the Great Depression. 

Although housing and retail sales data suggest that economic activity picked up early in the third quarter, business spending is weakening and inflation is slowing. 

On the bright side, the rise in consumer spending perhaps provides a glimmer of hope for the economy over the next few months.

"The improvement in spending activity suggests that overall economic activity may be off to a fairly decent start in the third quarter," said Millan Mulraine, senior macro strategist at TD Securities in New York.

The Commerce Department said on Thursday that consumer spending increased 0.4 percent in July after a flat reading in June. Last month's rise in consumer spending, which accounts for 70 percent of U.S. economic activity, was in line with economists' expectations.

When adjusted for inflation, consumer spending increased 0.4 percent, also the largest increase since February. Real consumer spending dipped 0.1 percent in June and last month's increase was an encouraging sign after consumption growth slowed by the most in a year in the second quarter. 

The mixed data doesn't make the Fed's decision-making any easier, however. Fed Chairman Ben Bernanke is heading for Jackson Hole, Wyo., where he is scheduled to give a speech Friday that many hope will provide clues about whether the Fed will do more to aid the sluggish economy.

Reuters contributed to this report.

Related story: Bernanke unlikely to tip Fed hand in Jackson Hole speech

Related story: Federal Reserve says economy grew slowly in July

 

CNBC's Steve Liesman discusses whether additional monetary easing in on the way from Bernanke and the ECB, with Dennis Lockhart, Atlanta Fed president.