Jobless Rolls Drop; Leading Indicators Rise

Two new reports Thursday pointed to signs that the economy may be regaining its footing. The total number of people on the unemployment insurance rolls dropped for the first time since early January, and the index of leading economic indicators rose for the second month in a row.

"The recession is losing steam ... if these trends continue, expect a slow recovery beginning before the end of the year," Conference Board economist Ken Goldstein said. He said the job market will take longer to rebound.

The total number of people on the unemployment insurance rolls dropped for the first time since early January, the Labor Department said, while new claims for benefits rose slightly.

The total unemployment insurance rolls fell by 148,000 to 6.69 million in the week ending June 6 — the largest drop in more than seven years.

The report shows that job losses are easing after companies made deep cuts earlier this year. But it's not clear whether recipients of unemployment insurance are finding new jobs or simply using up all their benefits, which typically last 26 weeks.

"It is unlikely that new hiring has picked up in any meaningful fashion," Joshua Shapiro, chief economist with MFR Inc., a consulting firm, wrote in a note to clients. "More probable is that long-term unemployed are starting to fall off the rolls."

The drop also breaks a string of 21 straight increases in continuing claims, the last 19 of which were records. A dip in continuing claims several weeks ago was later revised higher.

The department also said initial claims rose 3,000 to a seasonally adjusted 608,000 last week, above analysts' expectations. The four-week average, which smooths fluctuations, fell by 7,000 to 615,750. Continuing claims data lags initial claims by one week.

The drop in continuing claims could signal a slowing in the rise of the unemployment rate, which reached a 25-year high of 9.4 percent in May. Many economists forecast the rate could reach 10 percent by the end of the year.

Still, millions of Americans are receiving unemployment compensation under an emergency federal program authorized by Congress last summer and extended by the Obama administration's stimulus package.

About 2.36 million people received benefits under that program in the week ending May 30, an increase of more than 102,000 from the previous week. That's in addition to the 6.7 million people receiving benefits under the 26-week program typically provided by states.

Economists also are closely watching the level of first-time claims for signs the economy will recover by mid-summer, as many analysts predict.

"If the labor market is indeed stabilizing, we should see a marked decline in new unemployment filings in the weeks ahead," economists at Wrightson ICAP wrote in a note to clients this week.

Leading Indicators Up Again

A private research group said its forecast of economic activity rose in May, the second straight gain after seven months of declines.

The Conference Board said its index of leading economic indicators, designed to forecast activity in the next three to six months, rose 1.2 percent. Economists surveyed by Thomson Reuters expected a 0.9 percent increase in May.

The New York-based group says activity in the six-month period through May also rose 1.2 percent — the first time that measure has grown since April 2007.