New Reports Signal Continued Economic Weakness Leading Indicators Fall, While New Claims For Unemployment Insurance Shoot Up

The government released data Thursday exhibiting further weakness in the U.S. economy.

A gauge of future business activity fell for the fourth time in five months and new claims for unemployment insurance rose.

While the danger of recession has passed, and retail sales strengthened as the weather improved, “the economy still has shaky legs,” said Robert Dederick, an economic consultant at the Northern Trust Co., in Chicago.

The Conference Board’s index of leading economic indicators - intended to predict growth over the next half year - dropped 0.5 percent in January to a two-year low of 100.20. Harsh weather, however, which shortened the average work-week in January, accounted for much of the decline, analysts said.

Yet some of the weakness may be lasting: the New York-based research organization also cited flagging consumer confidence, and a decline in permits for new housing construction.

Meanwhile, first-time claims for unemployment insurance - a harbinger of job market conditions - rose last week by 6,000 to 363,000 after seasonal adjustment, the Labor Department reported.

The increase in jobless claims, though smaller than expected, is “the umpteenth indicator over the last 10 days” that’s “not suggestive of any strength in the economy,” said Deutsche Morgan Grenfell economist Elias Bikhazi, in New York.

Investors in U.S. bonds saw nothing they didn’t already know in the reports. The benchmark 30-year Treasury bond was little changed in late New York trading, with the yield unchanged at 6.46 percent. U.S. stocks were higher, with the Dow Jones Industrial Average rising 11.92 points to close at 5,641.69. The dollar fell against major currencies.

To be sure, economic conditions aren’t as fragile as they appeared just a few weeks ago, Bikhazi said. That means the Federal Reserve may refrain from spurring growth - by lowering its target for the federal funds rate on over-night bank loans - at its next policy meeting March 26, he said.

Today for example, the Labor Department is expected to report that the economy added 317,000 jobs in February, analysts said, bouncing back after a loss of 201,000 in January.

Meanwhile, retailers are reporting livelier sales as the weather improves, according to industry reports released Thursday. Same-store sales rose by more than 5 percent in February from the same month last year. Wal-Mart Inc., Sears Roebuck & Co., Kmart Corp., and other major chains reported robust increases.

Still, few people expect explosive economic growth in the months ahead. “Things are sluggish,” Dederick said. “The economy is sitting there in an arm chair, but it has pulled itself out of bed.”