More Evidence Of U.S. Economic Recovery

By John S. McClenahen On an almost daily basis, evidence grows of an accelerating U.S. recovery from the 2001 recession. For example, last week initial claims for unemployment insurance remained below the 400,000 tipping point for the second consecutive week. They totaled 398,000, the U.S. Labor Department reported on Aug. 14. And the department's four-week moving average of initial jobless claims, which many economists believe better reflects labor market conditions, fell by 4,250 last week to 394,250. Such numbers, while not signaling layoffs are over, do suggest, at the very least, a less negative labor market. "With claimants dropping and initial claims below 400,000, the prospect that job growth will re-emerge in August is reasonably bright," judges Maury Harris, chief U.S. economist at UBS Investment Research, New York. Meanwhile, U.S. inflation remains under control. The Labor Department's Producer Price Index (PPI) for Finished Goods rose just 0.1% in July, the smallest increase so far this year. At the so-called core crude level, Harris notes that PPI prices rose 0.8% in July following a 0.6% increase in June and says that "the gains reflect a bounce in commodity prices that is consistent with both stronger industrial production and a weaker dollar." He adds, however, that such strength has not yet "shown through convincingly" at the intermediate level. "Consequently, there is little evidence that producer prices are poised to strengthen much." U.S. exports are faring better in world markets. Between May and June, U.S. exports increased by $1.9 billion, helping to drive down the overall U.S. goods and services trade deficit to $39.5 billion in June from $41.5 billion in May, reports the U.S. Commerce Department. "The improvement could reflect some competitive gains from a weaker dollar, as well as some rise in global investment spending," says UBS' Harris.

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