NEW YORK – Evidence continues to build that the U.S. economy is strengthening — including on the jobs front. The Conference Board (search) said Thursday that its Composite Index of Leading Economic Indicators (search) rose 0.5 percent in December to 115.0 following gains of 0.2 percent in December and 0.3 percent in November.
The index is closely watched because it forecasts trends in the economy in the next three to six months.
In Washington, meanwhile, the Labor Department (search) reported that the number of people filing new claims for unemployment benefits fell sharply last week. That offered hope that companies may be feeling better about business conditions and are less inclined to hand out pink slips.
The department said that for the work week ending Feb. 14, new applications filed for jobless benefits plunged by a seasonally adjusted 24,000 to 344,000. It was the largest decline since the beginning of November and left claims at their lowest level since the week ending Jan. 24.
Meanwhile, a nationwide survey showed mortgage rates around the country dropped this week to their lowest levels in seven months.
The average rate on benchmark 30-year mortgages fell to 5.58 percent, down from 5.66 percent last week, Freddie Mac, the mortgage giant, said Thursday in its weekly survey of mortgage rates. This week's rate was the lowest since 5.52 percent for the week ending July 11.
Wall Street responded positively to the economic news. In early afternoon trading, the Dow Jones industrial average was up 66.68, or 0.6 percent, to 10,738.67. The Nasdaq composite index, buoyed by tech stocks, edged up 3.10, or 0.2 percent, to 2,079.57.
Gary R. Thayer, chief economist for A.G. Edwards & Sons Inc. in St. Louis, Mo., said the reports were encouraging.
"The increase in the leading indicators is a positive sign that there's potentially more growth ahead in the economy," he said.
The benefits report, Thayer said, indicates the labor market is firming up a bit.
"We're still lacking some job creation, but at least we're not seeing the size of layoffs we did a year ago," Thayer said. "The preponderance of evidence is that we're poised for better job growth."
Job creation has become a hot issue during this election year.
The economy has lost 2.2 million jobs since President Bush took office in January 2001. Democrats wanting to win back the White House have sought to highlight the slow job growth under his watch.
The business-funded Conference Board, based in New York, said that five of the 10 indicators that make up the leading index contributed to January's gain: consumer expectations, stock prices, average weekly manufacturing hours, vendor performance and a drop in initial claims for unemployment insurance. Four declined, while manufacturers' new orders for consumer goods and materials was unchanged.
Ken Goldstein, the business group's economist, noted that the index has been gaining since last spring.
The rise points to "sustained economic growth, perhaps through the first half of this year," he said.
Still, Goldstein warned that there were factors that could create bumps for the economy later this year.
"Consumer confidence could falter if job and wage growth don't continue to strengthen. Business confidence could erode. The lack of pricing power could be a big problem," he said. "But while these risks are important, their probabilities are not very high."
Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, a trade group in Arlington, Va., said that exports and investment in business equipment were strengthening and were beginning to resuscitate the hard-hit industrial sector.
In addition, he noted, consumer spending should get a boost in coming months from tax refunds as well as job growth.
"I think we're building the base for a sustained recovery," he said.
The Manufacturers Alliance own survey, released Thursday, indicated that 21 of 27 industries reported new orders or production that was higher in the fourth quarter of 2003 than a year earlier. That was up from 14 industries in the third quarter and 10 in the second quarter, the group said.
The Conference Board's Index of Coincident Indicators, which gauges current economic activity, rose 0.3 percent to 115.8 in January after showing no change in December.
The Index of Lagging Indicators was unchanged in January at 98.2 after dropping 0.4 percent in December.