Economy sends signals of more weakness to come
AP Business Writer
Higher unemployment claims and weak readings from two economic indexes reinforced recession worries Thursday.
The Labor Department said Thursday that applications for unemployment benefits rose to 372,000, an increase of 17,000 from the previous week.
Separately, the New York-based Conference Board's gauge of future economic activity rose 0.1 percent for March, reversing five months of decline. But the private business group's indicator has shown a 3.3 percent annual rate of decline since March 2007.
That's "the kind of result, that whenever we've seen it in the past, the U.S. economy has been heading into a recession," Michael Gregory, senior economist for BMO Nesbitt Burns, a Toronto investment bank. "The recession signal here is clear and unequivocal."
Stocks drooped following a rally Wednesday, with the Dow Jones industrial average down 30.78, or 0.24 percent, to 12,588.49, in afternoon trading. The Standard & Poor's 500 index slipped 5.41, or 0.40 percent, to 1,359.30, and the Nasdaq composite index fell 18.80, or 0.80 percent, to 2,331.31.
The Conference Board index is designed to forecast economic activity in the next three to six months based on 10 economic components, including stock prices, building permits and initial claims for unemployment benefits.
The Conference Board said another of its indexes, which measures current economic activity, has also deteriorated in recent months, with weakness becoming more widespread among the components of both.
The readings suggest "economic weakness is likely to continue in the near term," Ken Goldstein, labor economist at the Conference Board, said in a statement accompanying the report.
The jobless numbers told the same story. The four-week average for jobless claims was 376,000, down only slightly from 376,750, the previous week. Aside from the period in the fall of 2005 after Hurricane Katrina, the four-week average for claims has risen to levels last seen in 2003 when the country was mired in a long jobless recovery after the 2001 recession.
Claims have been unusually volatile in recent weeks, falling by 51,000 two weeks ago after having risen by 35,000 the week before that. Analysts said that claims have been difficult to read because of trouble the government is having adjusting the figures for seasonal changes to reflect this year's unusually early Easter and because of the impact of a strike at a key parts supplier for General Motors.
While the weekly unemployment claims were in line with economists' expectations, those expectations, overall, are grim.
Ian Shepherdson, chief economist at High Frequency Economics, said the claims average for the past two months has risen to a level similar to the start of the 2001 recession. He said he expected claims to keep rising in coming months and be above 400,000 on a weekly basis by this summer.
"We can think of no good reason why claims should now level off and plenty of reasons why they should be expected to rise further," Shepherdson said.
In March, the unemployment rate jumped to 5.1 percent as businesses cut 80,000 jobs, the biggest drop in payrolls in five years. Many economists believe that was the most dramatic indication to date that the country has fallen into a recession.
Meanwhile, the weakest business outlook report since 2001 from the Philadelphia Federal Reserve added to pessimism. The Philadelphia Fed regional survey of manufacturing demand and plans for capital spending showed new factory orders, shipments and employment dropping, its fifth straight reading below zero. A figure above zero indicates regional manufacturing is growing, while a number below zero indicates a decline.
The index deteriorated from -17.4 in March to -24.9 this month. In the past, such streaks have indicated the economy is either in a recession or on the verge of falling into one, according to Bear Stearns economist John Ryding.
Of the companies in the survey, 38 percent reported decreased activity in March, while demand for manufactured goods fell 18.8 percent.
Cost increases continue to be widespread, according to the report, and more firms reported increased prices for their own manufactured goods this month.
Associated Press Economics Writer Martin Crutsinger contributed to this report.
Copyright © 2008 The Seattle Times Company
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