Data Show U.S. Economic Pulse Still Strong

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Industrial Production
Tony Dejak/AP
By Jason Lange and Tim Ahmann

WASHINGTON -- The number of Americans filing new claims for jobless benefits fell to a 14-year low last week and industrial output rose sharply in September, positive signals that could help ease fears over the economic outlook.

Initial claims for state unemployment benefits dropped 23,000 to 264,000, the lowest level since 2000, the Labor Department said Thursday.

A separate report from the Federal Reserve showed production at the nation's factories, mines and utilities advanced a larger-than-expected 1 percent last month, the biggest gain since November 2012.

The data offered evidence the economy remained on solid ground, with the labor market gaining steam. Investors in recent days have come to the view that slowing growth overseas will weigh on the U.S. economy and force the Fed to delay a hike in interest rates.

Weak retail sales data Wednesday shook investor confidence and helped fuel a global sell-off in stock markets that continued Thursday. U.S. stock markets were trading sharply lower.

The jobless claims report nonetheless reinforced expectations that slack in the labor market was being reduced.

"Have we achieved full employment? Not yet. Are we getting closer? Absolutely," said Stephen Stanley, an economist at Amherst Pierpont Securities.

It's possible some of last week's drop in claims was related to America's Columbus Day holiday, which may have affected how the Labor Department adjusts the data for seasonal swings, economists at RBS said in a note to clients.

The government, however, said there were no unusual factors in the report, while the four-week moving average of claims, which irons out week-to-week volatility, also fell to its lowest level since 2000.

Oasis of Prosperity?

A Reuters poll published Thursday showed economists still clinging to the view that the Fed would raise benchmark borrowing costs from near zero in the second quarter of next year despite mounting signs of weakness overseas.

The poll, however, was largely complete before the latest stock market sell-off, which has been accompanied by a big shift in investor expectations for the path of U.S. monetary policy. Interest rates futures are now pointing to a rate hike in October 2015.

St. Louis Federal Reserve Bank President James Bullarad said in a television interview with Bloomberg that the U.S. central bank might want to keep its bond-buying program running for longer than anticipated given a drop in inflation expectations.

For now, at least, the U.S. economy is motoring ahead, with economists still expecting third-quarter growth to come in at around a 3 percent annual rate, a view buttressed by the pickup in industrial output.

The Fed pinned part of the gain to unusual weather that boosted air conditioning use, but there was also a broad-based increase in factory output, which grew a solid 0.5 percent.

A third report from the Fed's Philadelphia branch showed slowing growth in factory activity in the mid-Atlantic region.

9 Numbers That'll Tell You How the Economy's Really Doing
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Data Show U.S. Economic Pulse Still Strong
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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