- The Washington Times - Sunday, August 24, 2003

For the fourth consecutive month, the Conference Board’s index of Leading Economic Indicators (LEI) increased in July, strongly suggesting that the growth rate of the economy is poised to accelerate. Over the past four months, the index has registered a 1.8 percent increase. During the last three months, the index, which is designed to predict changes in the business cycle, has increased by 1.1 percent (May), an upwardly revised 0.3 percent (June) and 0.4 percent (July).

The Conference Board, an independent business organization that took over the compilation of the index from the Commerce Department several years ago, characterized the index’s four-month increase as “significant” and reported that the growth among the index’s 10 components has been “widespread.” The report for July declared that the leading index was “signaling a pickup in the rate of economic growth, which is starting to be reflected in both real GDP and the coincident index,” a composite index designed to track contemporaneous economic activity.

“The bottom line,” Conference Board economist Ken Goldstein told the Wall Street Journal, “is that the leading economic indicators are more favorable than at any time since the recession started more than two years ago.” Such movement in the LEI index is noteworthy because its predictive capability has been quite extraordinary over the past half century.

While Mr. Goldstein seemed enthusiastic about the growth prospects for the economy in the near future, he was not nearly as bullish about the prospects for a dip in the unemployment rate soon. According to his personal projection, the unemployment rate, which was 6.2 percent in July, “is going to go higher than 6.5 percent by Halloween, maybe to 7 percent” by the end of the year, Mr. Goldstein said in an interview. By June, however, he believes the unemployment rate will be lower than December’s.

Mr. Goldstein did not expect payrolls to increase before the end of the year. In 2004, however, he said monthly employment should increase by 75,000 to 100,000 jobs. Those are not gangbuster rates. At the lower end of the range, such job growth would not be enough to replace the more than 1 million jobs that have been lost just since the recession ended in November 2001, to say nothing of the 1.6 million jobs lost during the eight-month downturn. At the higher end (100,000 jobs per month next year), there would still be about 1.5 million fewer jobs at the end of 2004 than there were four years earlier.

The latest report on leading economic indicators was clearly good news. But with the rapid approach of an election year, the White House no doubt will be hoping for much stronger job growth next year than 100,000 jobs per month. Once again, we advise the president not to overpromise job growth. So long as the unemployment trend is steadily downward by next summer, there should be minimal public anger at the president in November — unless the president promises a rose garden, but only delivers a potted plant.

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