Jan 24, 2003 3 min read

WASHINGTON (AP) – The number of Americans filing new claims for unemployment benefits rose by 18,000 last week, but a key forecasting gauge of future economic activity was more promising, rising for a third consecutive month. The Conference Board reported that its Index of Leading Economic Indicators rose by 0.1 percent in December, lending support to the view that the economy will perform better in 2003.

While the increase was small, it was the third straight gain and followed stronger advances of 0.5 percent in November and 0.2 percent in October.

Conference board economist Ken Goldstein said that the string of positive readings “suggest that the economy might turn in a better performance in the first quarter of 2003 than it did in the second half of last year.”

However, in a sign that current conditions remain tough, the Labor Department reported that the number of Americans filing new claims for unemployment benefits rose to 381,000 last week, up from a revised figure of 363,000 the previous week.

The mixed economic data left Wall Street unimpressed. In late morning trading, the Dow Jones industrial average was down about 22 points.

In the past five trading sessions, the Dow has shed 501 points as investors remained glum about the economy’s prospects and a possible war in Iraq.

Private economists had been predicting a rise in jobless claims for the week, given that claims fell by an unexpectedly large 30,000 in the previous week.

Because of that sharp decline, the four-week moving average for jobless claims, which helps to smooth out weekly variations, declined last week to 386,500, down from 388,500 the week before and the lowest level since late November.

The government reported earlier this month that the nation’s jobless rate remained stuck at an eight-year high of 6 percent in December.

Many economists believe that rate will move even higher in coming months as the sluggish recovery from the 2001 recession fails to generate enough economic growth to prompt companies to start hiring back laid-off workers.

Many analysts are predicting the unemployment rate will peak at around 6.5 percent in early summer before expected stronger economic growth starts to generate more jobs.

Democrats have sought to use the current “jobless recovery” as evidence that President Bush’s economic policies have been a failure. Bush on Jan. 7 unveiled a new $674 billion, 10-year tax cut and economic stimulus program to ward off attacks that he is not doing enough to jump-start growth.

However, Democratic critics contend that the plan offers too little in stimulus for this year, when the economy will need it the most, and too much in large tax cuts for the wealthy in later years, when the economy is expected to be growing at a fast enough rate to pus the unemployment rate down.

What little strength the economy did exhibit last year was aided by the Federal Reserve, which in 12 steps has pushed interest rates to a 41-year low, triggering a boom in housing construction and sales and also helping other areas of consumer spending.

Fed policymakers hold their first meeting of 2003 next Tuesday and Wednesday. Most analysts believe they will leave the overnight borrowing rate for banks unchanged at 1.25 percent with some economists predicting the rate could stay at that low level for much of this year.

Labor Department economists cautioned that this week’s 18,000 increase in jobless claims could be revised significantly next week because it was based on more than the usual number of estimates of lay-off activity in various states because Monday’s Martin Luther King holiday provided less time to collect data.