Today has already been a big day for news on the U.S. economy, so I’d like to hit the highlights and then cover how some of the world’s other major economies are doing.
Now, usually when you look at measures of economic growth, you want to see figures increasing, not decreasing. Well, that’s not the case with initial claims for unemployment, which measure the number of filings for state jobless benefits. Understandably, it’s a good sign if fewer people are filing for jobless benefits because it indicates that fewer people need them.
So, one of the best headlines this morning was the Labor Department’s announcement that jobless claims fell 5,000 to 348,000—a four-year low! This came in far below economists’ estimates of 355,000.
Of course, this is considered a somewhat haphazard indicator of economic activity, so economists tend to track the four-week-moving average to get a better sense of long-term trends. This week, the four-week-moving average declined from 356,250 to 355,000.
To provide some context, a reading of 400,000 indicates job growth, so anything that falls below this benchmark is good news. The last time that initial claims came above 400,000 was the week of November 28, when it climbed to 402,000. Since then, weekly jobless claims have been on a steady decline.
We also received good news from the Conference Board this morning, who reported that its index of leading economic indicators climbed 0.7% in February—the highest gain in 11 months! This topped the consensus estimate of a 0.6% rise and represented a significant uptick from January’s 0.2% gain.
Out of the 10 economic metrics included in the index, eight made improvements; this suggests that the U.S. economy is improving on several fronts. If this index continues this kind of growth, we could very well see quarterly Gross Domestic Product (GDP), the broadest measurement of economic activity, grow by over 4% later in the year.
Unfortunately, gains in the U.S. don’t necessary translate to other major world economies. The major indices fell today on news that manufacturing contracted in both China and the euro area. Specifically, China reported that its preliminary reading for manufacturing fell from 49.6 to 48.1 this month. This represents the lowest level since November. In the euro area, the composite index of manufacturing activity similarly dipped from 49.3 to 48.7. A reading of 50 represents a key benchmark; any figure below it represents a contraction.
What we can take from today’s economic reports is that the global economy is improving in fits and starts. Lately, the U.S. has been making steadier gains, but both the major emerging markets as well as the euro area need to catch up. As always, I’ll keep an eye on the latest economic reports and let you know if there are any major developments.