NEW YORK, Aug. 21, 2008
Economy Languishes In Low Gear
Private Sector Measure Of Economic Health Shows Largest Drop In A Year
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(CBS/AP)
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Interactive Eye On The Economy In-depth features on U.S. markets, taxes, employment and the Federal Reserve.
The New York-based Conference Board said Thursday its monthly forecast of future economic activity fell 0.7 percent in July, far more than the consensus estimate of a 0.2 percent decline by Wall Street economists surveyed by Thomson/IFR.
The last time the index showed a drop this great was last August, when it fell by 1 percent.
The largest drag on the index was the decline in building permits, followed by dropping stock prices, rising unemployment claims, a tightened money supply and falling manufacturers' orders for consumer goods. The index has slipped 0.9 percent for the six months ending in July.
"The economy is stuck somewhere between sluggish growth and recession," said Mark Vitner, senior economist at Wachovia Corp. "We're in economic purgatory."
Lehman Brothers economist Zach Pandl blamed the drop on technical factors, saying a change in New York City's building code, effective July 1, led to a June spike in new permits followed by last month's steep decline. He also attributed part of high jobless claims data to the 13-week extension of unemployment benefits approved by Congress in June.
"The decline in the leading index should therefore not be interpreted as a sign the outlook is quickly deteriorating," Pandl wrote in a research note.
Meanwhile, the Labor Department's jobless claims data showed new filings dropped to 432,000, down by 13,000 from the previous week, a greater improvement than analysts expected. However, the four-week average climbed to 445,750, the highest level since November 2003.
"The labor market is soft, but not collapsing," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pa. "That's critical. While consumers may be cautious and conservative in their spending, as long as the rate does not spike ... there should be enough income growth to keep the economy muddling along."
Unemployment claims have increased in the past several weeks, partly reflecting an outreach effort by the Labor Department to notify people of the benefit extension. The action has turned up some people eligible to file new claims.
That effort - coupled with businesses cutting jobs due to higher energy costs, tighter credit markets and a slowing economy - caused claims to spike to a six-year high of 457,000 for the week of Aug. 2.
The number of people continuing to receive benefits last week also dropped slightly to 3.36 million, but the four-week average rose to 3.33 million, its highest level in almost five years.
That number doesn't include the government's extended benefits program. The Labor Department estimated an additional 1.29 million unemployed workers are getting benefits under that program.
Wall Street shrugged off the numbers. Financial stocks rebounded after an analyst upgraded Lehman Brothers Holdings Inc. to "buy," saying the investment bank has become a hostile takeover candidate.
The Dow Jones industrial average rose 12.78 to 11,430.21. The Standard & Poor's 500 rose 3.18 to 1,277.72, and the Nasdaq composite lost 8.70 to 2,380.38.
Still, companies likely will increase layoffs in the next several months as profits continue to suffer from higher food and energy prices, Vitner said. The unemployment rate could reach 6.5 percent by mid-2009, from 5.7 percent in July, he added.
Several companies have announced job cuts recently. Newspaper publisher Gannett Co. Inc. said it would lay off 600 workers, Ford Motor Co. said it would cut 300 workers at an engine plant, and chip designer Rambus Inc. is trimming 90 jobs.
To be sure, some companies are bucking that trend.
"We're always hiring," said Fred Bock, vice president of marketing and business planning at Peerless Pump Co. in Indianapolis, which makes fire protection pumps for high rises. Peerless Pump has seen international sales increase 20 percent in the last four years, helped by new construction in the Middle East and Asia.
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Best-selling author Mitch Albom on his first nonfiction work since "Tuesdays with Morrie."
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See all 27 CommentsBrought to you by 52 years of government meddling.
The market has always inversely tracked human misery, back in the 70s people were losing tens of thousands of jobs, while the companies laying them off saw their stock values rise.
The greatest advances in the stock market always occurred in the wake of the decrease in earning nd buying power of the public. The Reagan boom as a jobless one, as was the Clinton boom. Bush only had minor upticks, like the subprime real estate bubble, on a plummeting economy, but he trumpeted those as booms, McSame is following the same trick.
Posted by jydavis1
No problem, as long as I can pay with your money.
Mission Accomplished.
Vote Exxon John for more of the same.
Posted by jydavis1 at 02:29 PM : Aug 22, 2008
Yeah, right.
The economy is no where near the bottom. Won''t be for more than a year. Thanks to sub-prime, Bu$h''s deficits and the price of oil.
I will not shop!!!!
In the U.K., where a housing problem mirrors the U.S., the growth rate and consumer spending cycles also mirror that of the U.S. but the U.K did not have a stimulous package! That says that the stimulous package really had no effect when you subtract what would have been a normal cycle. It was smoke and mirrors only.
And BTW, I can work from home on occasion, so I need internet. But what I pay for it pales in comparison to the cost of gas and tolls to commute, plus, as I found out, it''s a very good ''investment'' to keep internet and e-mail if you find yourself looking for work.
Now the dollar is worth 70 cents/Euro. The value in 2000 dollars of the stock market is 6,500."
Yes. Things are worse than they seem...
Posted by downtowner97 at 12:18 AM : Aug 22, 2008
lollll...you guys are funny. You claim you didn''t vote for Kerry ''cuz of stuff like you mention above, but you insist that we should vote for McCain when he does the same stuff.
Man...those private prep and Ivy League schools you Republicans go to must be so scared of making you appear elitist that they don''t even teach ya big words like "hypocrite" anymore..
Don''t worry America. McCain says the economy is doing well. Of course he''s got 7 mansions and is worth over 100 million dollars but never mind that. The more he has, the more trickles down to you right?
Thanks for voting Republican.
lol!
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