The Empire 364

'Reports Suggest Economy Weakening More
By EILEEN ALT POWELL
AP Business Writer



NEW YORK -- A rise in jobless claims and a drop in a key forecasting gauge provided the latest evidence that the U.S. economy is faltering and may be slipping into recession.

The Conference Board, a business-backed research group, said Thursday that its index of leading economic indicators fell in February for the fifth consecutive month. The index, which is designed to forecast where the nation's economy is headed in the next three to six months, dipped 0.3 percent to 135.0 in February after slumping 0.4 percent the month before.

In Washington, meanwhile, the Labor Department said that applications for unemployment benefits totaled 378,000 last week. That was an increase of 22,000 from the previous week and the highest level in nearly two months.

The four-week average for new claims rose to 365,250, which was the highest level since a flood of claims caused by the 2005 Gulf Coast hurricanes.

Ken Goldstein, labor economist at the Conference Board, said in a statement accompanying the leading indicators report that economic signals "are flashing yellow."

He said the numbers indicate "the economy may be grinding to a halt" and that "a small contraction in economic activity cannot be ruled out."

A Federal Reserve reading of business activity in the Philadelphia area showed contraction -- but not as much as analysts expected. The news helped the stock market on Thursday recover from a drop the day before.

In afternoon trading, the Dow Jones industrial average climbed 158.02, or 1.3 percent, to 12,257.68. Other indexes also were up.

The economy has been hard hit by rising gas prices, falling home prices and tightening credit markets, which have forced consumers and businesses to cut spending. As a result, the U.S. economy may have stopped growing in the current quarter and could continue faltering in the second quarter. That would meet a technical definition of a recession -- two consecutive quarters of economic contraction.

Pessimism about short-term U.S. economic prospects was voiced by the Organization for Economic Cooperation and Development, which on Thursday downgraded its growth forecasts for the United States, the euro zone and Japan

The OECD, a Paris-based institution that supports global development, cut its forecast for first-quarter gross domestic product in the United States to 0.1 percent and predicted that GDP would be flat in the second quarter.'

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