Economy Has A Pulse
A yardstick of U.S. economic activity rose markedly in November in a sign that the nation's financial situation is beginning to improve.
A better employment picture and a somewhat stronger financial sector helped boost consumer attitudes, pushing the Conference Board's Index of Leading Economic Indicators up 0.7 percent, the largest monthly gain in a year.
The increase, which was slightly above analysts' expectations, leaves the Index at 112.3, and follows a revised 0.1 percent gain in October.
"The financial market slump seems to be lifting a little this autumn. Recent consumer buying figures have somewhat allayed fears about a weak holiday season and consumer attitudes have also improved," Conference Board economist Ken Goldstein said. "The latest leading indicator readings show that at least some improvement is beginning to develop."
Earlier, the government reported that new claims for unemployment benefits dropped last week, but even with the decline the level of layoffs was still high and suggested that the job market was sluggish, reflecting companies' concerns about the uneven economic recovery.
The Labor Department reported Thursday that new claims for jobless benefits fell by a seasonally adjusted 11,000 to 433,000 for the work week ending Dec. 14. Yet, even with the drop, claims remained above the 400,000 mark, a level associated with a lackluster job market.
"While the labor market is not seriously falling off a cliff again, it is not really going anywhere," said economist Clifford Waldman, president of Waldman Associates.
Last week's decline, which was smaller than analysts were predicting, came after new claims shot up by 86,000 in the previous week, the biggest one-week gain since the work week ending July 25, 1992. But private economists and Labor Department analysts cautioned not to read too much into the jump, saying it was exaggerated by difficulties adjusting for seasonal factors.
The more stable four-week moving average of claims, which smoothes out weekly fluctuations, rose last week to 400,750, the highest level since the beginning of November.
And, the number of unemployed people continuing to draw jobless benefits also went up by 229,000 to 3.5 million for the work week ending Dec. 7, the most recent period for which the data is available.
The jump in the index means the economic reading has now regained all the ground it has lost since May, and is now 3.6 percent higher than the lowpoint it reached in March of last year.
Five of the 10 indicators that make up the leading index rose in November, including stock prices and real money supply, the Conference Board said. Negative contributors included vendor performance and building permits. One component, average weekly manufacturing hours, held steady.
In addition, three of the four measures in the board's coincident index, which measures the current economic activity, also rose. That index now stands at 115.0, up 0.1 percent from the previous month.
The index of lagging indicators, which show economic changes that have already occurred, declined 0.2 percent to 99.7.
The economic recovery has been advancing this year, but in fits and starts, an environment that has made businesses wary about making big commitments in hiring and in capital investment. Fears about a war with Iraq, the turbulent stock market and other economic uncertainties have weighed heavily on companies and made workers who still have jobs anxious about keeping them.
President Bush recently said he wants the new Congress to extend unemployment insurance benefits for jobless workers soon after it convenes next month.
Extended federal aid for the jobless runs out Dec. 28. Congress last March approved a 13-week extension in federal unemployment aid. That extension is to run out for people who have exhausted the 26 weeks of payments they typically receive through states.
Efforts to continue the benefits fell victim to partisan wrangling between Senate Democrats and House Republicans in late November's final days of the last congressional session.
Democratic leaders had urged Mr. Bush to ask House Republicans to pass the more generous Senate extension plan. The White House remained on the sidelines throughout.
After slashing short-term interest rates by a bold half-point in November, Federal Reserve policy-makers last week decided to hold short-term interest rates steady at a 41-year low of 1.25 percent. They suggested that such low rates will help foster economic growth.
By leaving rates at low levels, Fed policy-makers hope to encourage consumers to spend more and for businesses to ramp-up investment, forces that would help the recovery.
The nation's unemployment rate jumped to 6 percent in November, matching an eight-year high set in April. Companies slashed 40,000 jobs during the month. Economists believe the jobless rate will stay in that range, or possibly creep up, in the coming months.