The Economy May Be Weakening More

A rise in unemployment shows evidence that the U.S. economy is faltering and may be slipping into recession. The Labor Department said that applications for unemployment benefits totaled 378,000 last week which was an increase of 22,000 from the previous week and the highest level in nearly two months. The Conference Board announced on Thursday that its index of leading economic indicators fell in February for the fifth consecutive month. The index, which is designed to forecast where the nation's economy is headed in the next three to six months, dipped 0.3 percent to 135.0 in February after slumping 0.4 percent the month before. Ken Goldstein, labor economist at the Conference Board, said in a statement accompanying the leading indicators report that economic signals "are flashing yellow."He said the numbers indicate "the economy may be grinding to a halt" and that "a small contraction in economic activity cannot be ruled out."

Recently, the economy has witnessed a rise in gas prices, a fall in home prices and a tightening of the credit markets, which have forced consumers and businesses to cut spending. As a result, the economy may have stopped growing in the current quarter and could continue faltering in the second quarter. Pessimism about short-term U.S. economic prospects was voiced by the Organization for Economic Cooperation and Development, which on Thursday downgraded its growth forecasts for the United States, the euro zone and Japan. However, most experts expect any downturn to be relatively mild and probably short-lived because the Federal Reserve has aggressively lowered interest rates and made more funds available to banks and brokerages. Also, the Bush administration has been moving on several fronts to boost the economy, including the promise of tax rebates starting in the summer.

References:

Eilleen Powell. "Economy Might