The U.S. Commerce Department reported that orders for big-ticket items fell in August, the first time in four months, largely due to a drop in demand for automobiles.

Orders for durable goods decreased by 0.9% to $173.32 billion last month. This followed a 1.5% rise in July. Economists had expected a 0.7% increase in August orders.

Markets were looking for a 0.8% rise.

“We had been looking for weakness in U.S. durable goods orders for August and were less surprised than the market by the 0.9% drop,” BMO Nesbitt says. “The durable goods decline represents a month of consolidation in a rising trend and should not be viewed as a big disappointment.”

RBC Financial says that the underlying details of the report were also generally weak, “although many sectors likely lost a bit of momentum from gains registered in the previous two months”. It notes, “Non-defense capital goods orders excluding aircraft, a good proxy for business investment activity fell by 0.8% during August. However, defense orders in the month actually rose, likely due to the military commitments in the Middle East. Falling substantially more than orders, shipments declined by 2.9%, fully reversing the previous month’s 2.8% gain.”

“While the general tone of this report was not great, there was some good news to be found,” RBC says. “Unfilled orders, both for defense and non-defense capital goods increased, signaling that business confidence and planning remains positive. This is a key ingredient for the recovery. Also, while monthly volatility can afflict the orders data, the trend is clearly up. Non-defense capital goods orders ex-aircraft remain up 8% since the beginning of the year, which is cause for some optimism despite the dour tone of today’s durable goods report.”

“There were lots of good statistical reasons to look for the modest drop in orders, not the least of which was the huge seasonal push in July that was likely overstated. We follow ISM in the seasonally weak summer months as the more reliable factory measure and it was strong in August. So, our opinion is that the weakness in durable goods bookings was isolated, misleading, and predictable,” Nesbitt concludes.

In a separate release, the U.S. Labor Department said initial jobless claims dropped by 19,000 to a seven-month low of 381,000.

It’s the first time in a month that the number has been below 400,000, but the good news is dampened by the fact that Hurricane Isabel, which buffeted 10 states along the East Coast, accounted for at least half the decline last week. The storm shut down many state government offices.

“While the trend in claims fell to 407,000, it is unfortunately still indicative of a flat labor market and there are yet to be any signs in the claims data that hiring activity is improving. Indeed, during last week, claims rose in 30 states and territories and fell in 21 with two reporting no change. Thus, underlying weakness in the U.S. labour market remains a key risk that could threaten the durability of the recovery underway,” RBC Financial warns.

Nesbitt agrees that the jury is still out on whether U.S. job markets are finally thawing.