Washington, March 22 (Bloomberg) -- The U.S. economic slowdown willcontinue for the next few months, an index of leading statistics showed, andworkers filed for unemployment benefits last week at close to the fastest pacein 2 1/2 years. The index of leading economic indicators, intended to forecast the course ofgrowth over the next six months, fell 0.2 percent in Februar, the New York-based Conference Board said. It was the eighth decline in 10 months andfollowed a 0.5 percent rise a month earlier. The biggest drag on the Februaryindex was an increase in the number of workers filing jobless claims. Last week, claims totaled 379,000, the Labor Department said. That's close tothe 380,000 reported for the previous week, which was the highest since July1998, when a General Motors Corp. strike hobbled production. As the record economic expansion -- just beginning its 11th year -- showssigns of sputtering, companies such as Procter & Gamble Co. and OracleCorp. are cutting jobs and trimming costs. ``The ugliness just keeps getting uglier,'' said Tim Rogers, chief economist atBriefing.com in Boston. ``I am optimistic enough to think we will avoidrecession. I just don't think the turn higher is at our doorstep'' yet. Two days ago, to revive growth, Federal Reserve policy makers lowered theirbenchmark interest rate by a half percentage point to 5 percent, the third suchreduction this year. On Jan. 31, the Fed's rate-setting Open Market Committee had reduced theovernight rate by a half-point because of a ``rapid weakening'' in the economy,according to the minutes of the meeting released today.
`Aggressive' Rate Reductions
Policy makers saw the two January rate reductions as ``a relatively aggressivepolicy adjustment in a short period of time,'' needed to give the economy aboost, the minutes said. In the fourth quarter, the economy cooled to a 1.1percent annual growth rate that was the slowest in 5 1/2 years. Investors expect central bankers to lower the overnight bank lending rate againand possibly before the next Fed meeting on May 15. ``The economy's still ina fragile state and I'm anticipating another'' half-percentage-point reduction atthe May meeting, said Richard Yamarone, senior economist at ArgusResearch Corp. in New York. The index of leading indicators is intended to forecast the direction of theeconomy over the next six months. The February reading ``suggests that thisperiod of slower growth will probably continue for the next few months,'' saidKen Goldstein, a Conference Board economist.
Stocks Fall
February's index was also pulled down by a drop in consumer confidence andslumping stock prices. The Dow Jones Industrial Average fell for a third daytoday, as three out of four stocks traded on the New York Stock Exchangedeclined. That brought the Dow's loss from its January 2000 record to 20percent. The Dow fell 98 points, or 1 percent, to close at 9389.48. The NasdaqComposite Index rose 67 points, or 3.7 percent, to close at 1897.70. Asstocks fell, investors flocked to the safety of U.S. Treasury securities. Thegovernment's 10-year Treasury note rose 5/16 point, pushing down its yield 4basis points to 4.74 percent, the lowest in more than two years. Unemployment will probably rise to 4.5 percent by the end of the year, Rogerssaid. The jobless rate in February was 4.2 percent. Today's Labor Department report showed the four-week average for newclaims, which smoothes out volatility in the weekly number, rose to 377,000last week from 365,500. Last week's average was the highest since April 1996.
Firing Workers
Many companies, particularly manufacturers, have responded to the economicslowdown by firing workers. Procter & Gamble, the largest U.S. household-products maker, announced today it will eliminate 9,600 jobs, or 9 percent ofits workforce, to reduce costs. About 40 percent of the job cuts will be in theU.S. Oracle, the second-biggest independent software maker, said Tuesday it wouldeliminate almost 900 jobs because it is selling fewer products. SolectronCorp., the No. 1 contract manufacturer of electronics, and Adaptec Inc., amaker of cards that speed computer connections, also announced job cutsthis week. Such actions explain why first-time applications for unemployment benefitshave accelerated. This year, jobless claims have averaged 350,400, up fromthe weekly average of 302,500 last year and the most since 351,000 in 1996. Still, the U.S. is creating more jobs than it sheds. In February, the economyadded 135,000 jobs after gaining 224,000 positions in January, Labor statisticsshowed earlier this month. And the Labor Department said today the totalnumber of people collecting jobless benefits fell by 10,000 to 2.473 million inthe week ended March 10.