A widely followed index that foreshadows future economic activity jumped more than 1 percent last month for the second month in a row, adding more evidence to the belief by many economists that the longest recession since World War II will probably end this year.
In another economic development, the number of jobless Americans collecting regular unemployment benefits declined by the largest amount in more than seven years and for the first time since early January. Also, the unemployment rate among people eligible for jobless benefits fell slightly for the first time since December.
However, analysts cautioned that the plunge in the number of people collecting regular jobless benefits may simply mean that many of them have exhausted their benefits and have moved to another category where they are now collecting emergency unemployment benefits.
The Leading Economic Index (LEI) jumped 1.2 percent in May after rising 1.1 percent in April, the New York-based Conference Board reported Thursday. It was the first time since November and December 2001 that the LEI has recorded consecutive monthly gains of at least 1 percent. The last recession ended in November 2001.
“The second consecutive gain in the LEI is the latest sign that after 18 months, the deepest recession in the postwar era is drawing to a close,” said Tim Quinlan, an analyst at Wachovia Economics Group.
Seven of the 10 indicators comprising the index increased last month, led by supplier deliveries, interest rate movements, stock prices, the money supply and consumer confidence.
“The recession is losing steam,” said Ken Goldstein, a Conference Board economist who noted that financial-market volatility is abating and the housing market appears to be stabilizing. “If these trends continue, expect a slow recovery beginning before the end of the year. However, employment will take longer to turn around.”
The economy has lost 6 million jobs since the recession began in December 2007. At 9.4 percent in May, the unemployment rate reached its highest level in more than 25 years. Echoing the views of many private economists and the Congressional Budget Office, President Obama predicted this week that the unemployment rate would reach at least 10 percent.
The number of jobless workers collecting regular unemployment benefits during the week ending June 6 plunged by 148,000 to 6.69 million, the Labor Department reported Thursday. It was the steepest weekly decline since November 2001. It also snapped a 19-week streak of record highs.
The Labor Department also reported that initial jobless claims increased by 3,000 to 608,000 for the week ending June 13. The four-week average, which smooths volatile weekly changes, fell by 7,000 to 615,750 and reached its lowest point since the middle of February.
Regular unemployment benefits provided by states last up to 26 weeks. The stimulus package in February extended an emergency federal program that Congress first approved last summer. The federal program adds between 13 and 20 weeks of extended benefits, depending on a state’s unemployment rate and whether a state enacts a voluntary program to pay for additional weeks of benefits.
Besides the 6.7 million receiving regular benefits under the 26-week limit, states reported that an additional 2.4 million were collecting benefits at the end of May under the emergency extensions. The number of people claiming emergency unemployment benefits increased by 103,000 during the last week of May.
“An unwelcome acceleration in extended benefits over the past several weeks indicates that some of the decline in continuing claims is merely due to unemployed workers exhausting their regular benefits and falling back on the additional lifelines provided in stimulus legislation over the past year, suggesting a long road toward a labor market recovery,” said Andrew Gledhill of Moody’s Economy.com.
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