The battered US economy could be on course for recovery, according to seven different key economic indicators published last week: Factory Orders Productivity and Unit Labor Costs (both preliminary), Jobless Claims, Consumer Credit, Wholesale Inventories and Wholesale Sales.

The data, collated by Thomson Financial/IFR, points to an expanding economy for the first time in eighteen months. The one fly in the ointment could be jobs, according to the US Labor department, which reported a continuing fall in payroll employment during January, although at a slower rate than in the months following September 11.

The bellwether manufacturing sector, hardest hit by the downturn, looks to be regaining health, according to one report, while consumer confidence rose for the fourth successive month and construction spend rose slightly in December.

There were conflicting signals on employment. The Labor Department’s business survey indicated a contraction of 924,000 in the total US workforce during January to 141.4 million; conversely its household survey reported a 5.6% decline in unemployment, down from December’s 5.8%.

The government defines people as unemployed only if they are actively looking for work; if they have stopped doing so, they are deemed to have withdrawn from the labor market. This definition could account for the apparent fall in unemployment, believe some economists, suggesting that a growing number of workers have become discouraged and quit job-seeking.

However, acting commissioner of the Bureau of Labor Statistics Lois Orr warns: “I would caution against reading too much into a single month's estimate for any data series, particularly in a month such as January, when there are large seasonal movements that can be difficult to adjust precisely.”

News source: Wall Street Journal