Economic gauge hits highest level ever


Published: Friday, January 23, 2004 at 6:01 a.m.
Last Modified: Thursday, January 22, 2004 at 11:30 p.m.
NEW YORK - An improving job market and increasing consumer spending lifted a key measure of future economic activity in December to its highest level ever, a private business group reported Thursday.
The 0.2 percent gain in the Conference Board's Composite Index of Leading Economic Indicators met analysts' expectations - and coincided with fresh government unemployment data that also suggested the economic recovery is solidifying.
"Both of these numbers are encouraging. They point to a continued upswing in the U.S. economy and, more importantly, improvement in a job market which has been the missing link of the recovery story," said Lynn Reaser, chief economist at Banc of America Capital Management.
The index of leading indicators, which is closely watched because it forecasts trends in the economy in the next three to six months, now stands at 114.3, surpassing the previous high set in November of 114.1. The index stood at 100 in 1996, its base year.
December also marked the ninth consecutive monthly gain for the index, which rose a revised 0.2 percent in November.
"All indicators point to continued economic growth," said Ken Goldstein, economist for the Conference Board. "More job gains than in November and December are in store for the early months of 2004. Consumer spending growth is relatively strong and the strong recovery in business investment in equipment and software remains on track."
The news got a mixed reception on Wall Street, where investors were more focused on corporate earnings reports. The Dow Jones industrials were up 2.67 at 10,626.29, while the Nasdaq composite index slipped 14.25 to 2,128.20. The Standard & Poor's 500 index was down 2.53 at 1,145.09.
In December, seven of the 10 factors that make up the index increased, including stock prices and building permits.
"These numbers don't usually give you an indication of magnitude of growth but they do show direction," said Alexander Paris, economist for Barrington Research.
"They're really confirming that the economy is going to continue to grow all through 2004."
The Conference Board's coincident index, which measures current economic conditions, and its lagging index, which measures past conditions, each increased 0.1 percent.
Also Thursday, the Labor Department reported that for the second week in a row, fewer people filed new claims to collect unemployment benefits - a possible indication that American businesses are growing more confident about the sustainability of an economic recovery.
Employment numbers have been slow to recover following the nation's economic downturn, even as other indicators, including the stock market, have strengthened. Some economists have expressed concern that too few new jobs are being created.
The Labor Department data showed that for the work week ending Jan. 17, new applications filed for unemployment insurance dipped by a seasonally adjusted 1,000 to 341,000, the lowest level since the end of December - and above the expectations of analysts, who had forecast a rise of about 2,000 for last week.
At the same time, the more stable four-week moving average of claims dropped by 3,250 last week to 344,500, the lowest level since the week ending Jan. 27, 2001.
With the four-week moving average of jobless claims running below 400,000 for 16 straight weeks, economists are growing more confident that the fragile job market is turning the corner.
"These numbers suggest that companies are laying off fewer workers. Now the question is whether the pace of new hiring is beginning to pick up," said Reaser, the Banc of America Capital Management economist.

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