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Data Sends Mixed Signals About
Economy's Course


New data released last week paints a confusing picture of where the U.S. economy is headed in the near term.

  • Unemployment Up
    While the unemployment rate continued to climb, hitting 9.7% in August, the rate of job losses remained lower, as it had in June and July, according to figures from the Bureau of Labor Statistics. (BLS).

    Some 466,000 persons joined the ranks of the unemployed in August, bringing the total to 14.9 million throughout the U.S. That's a bad sign.

    The unemployment rate last month rose by "only" 0.3%, after remaining fairly steady in June and July. From December 2008 through May, the rate climbed by nearly 0.5% a month. Unemployment growing at a slower rate is a better sign, if not a good one.

    Since the recession began in December 2007, the number of unemployed persons has risen by 7.4 million—or nearly doubled in that period—and the unemployment rate has grown by 4.8%—or slightly more than doubled.

    The Conference Board Employment Trends Index reflects a similar picture. In July, the index fell 0.1% to stand at 88.1, a decline of 18.5% from July 2008. The components of the index, an aggregate of eight labor market indicators, were mixed.

    "The flatness of the Employment Trends Index in recent months suggests that we won't see job growth until the end of the year," said Gad Levanson, senior economist at The Conference Board. "The fact that the index cannot get off the ground is another sign of a weak recovery, perhaps a jobless one."

  • Productivity Up
    The flip side to lower employment, however, is greater productivity, and that's generally considered good. Nonfarm business sector labor productivity in the second quarter experienced its biggest quarterly gain since the third quarter of 2003, the BLS reported. Productivity increased at an annual rate of 6.6%.

    The gain reflects a 1.5% decline in output, but workers put in 7.6% fewer hours, so productivity gained, the result of employers trying to squeeze as much work as possible out of their reduced workforces in the face of weakened demand.

    In manufacturing, productivity grew by 4.9%, the result of output declining by 9.8% and worker hours falling by 14%. But the productivity gain in manufacturing was the largest since the first quarter of 2005.

  • Construction Spending Down
    Meanwhile, the rate of construction spending declined again in July, the U.S. Census reports. The rate—some $958 billion—fell by approximately 1.6% versus June It was 10.5% below July 2008. During the first seven months of the year, construction spending of $543.8 billion was 11.4% down from the same period last year, when spending topped $613 billion.

  • Leading Economic Indicators Up
    Despite all that, The Conference Board Leading Economic Index for the U.S. actually rose 0.6% in July, for a forth straight month. For the past six months, the index has risen at a 6.2% annual rate in contrast to a 5.4% annual rate of decline during the previous half year.

    Various index components have also grown stronger, The Conference Board says. "The interest rate spread, initial unemployment claims and the average workweek made large positive contributions to the index this month, more than offsetting the negative contributions from consumer expectations, real money supply and building permits," according to The Board.

What does all this mean? The economy does appear to be recovering, but don't expect a sudden rush of good news. It looks like it will be a slow, sometimes difficult, often frustrating climb back to full economic recovery.