Leading Index Suggests Sluggish Recovery

By John S. McClenahen The Conference Board's closely watched index of leading economic indicators suggests that U.S. recovery from the 2001 recession will remain sluggish through June, and perhaps even longer. The leading index declined 0.4% in February, the first time it had fallen since September 2002, and now stands at 111.1 (1996=100), reports the New York-based business research group. The index is a general indicator of U.S. economic activity three to six months in the future. Six of the index's 10 components, including manufacturers' new orders for consumer goods and materials and manufacturers' new orders for non-defense capital goods, fell in February. Additionally, the latest U.S. Labor Department report on unemployment claims is consistent with a continuing sluggish recovery from recession. For the week ending March 15, initial claims for unemployment insurance were 421,000, a decrease of 4,000 from the previous week's revised figure of 425,000. However, the four-week moving average for claims, which many economists consider a more reliable indicator of labor market trends, was up by 3,750 claims to 424,750. With the numbers for both initial claims and the four-week average running above 400,000, it's unlikely that the U.S. economy is creating a significant number of new jobs. "We are tentatively calling for no change in payrolls and a 0.2-point rise in the unemployment rate to 6%" when the U.S. Labor Department issues its March employment report on April 4, says Maury Harris, chief U.S. economist at UBS Warburg LLC, New York.

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