STAFFING INDUSTRY ANALYSTS BRIEFING

Posted On: 9/5/2008 http://www.staffingindustry.com

BRIEFING - Economic indicators August 2008
ECRI weekly leading index contracts
Manufacturing and nonmanufacturing indices running flat
Four-week jobless claims up 11.5% from July
Craig Johnson

Event
August was a tough month for economic indicators. Several indicators fell and others posted little change.

Background and analysis
The Economic Cycle Research Institute's weekly leading index contracted in August. The index declined 11.7% in the week ended Aug. 29 versus the year earlier. This is 360 basis points worse than the comparable number of a month ago.

In the U.S. manufacturing sector, economic activity in August was about the same as in July, the Institute for Supply Management reported. The ISM's key purchasing managers' index for manufacturing registered 49.9 in August, nearly unchanged from 50.0 in July. Readings of more than 50 indicate expansion.

"This continues the 2008 trend toward negligible growth or contraction each month, but ultimately results in very little overall change in the sector," said Norbert Ore, chair of the ISM's manufacturing business survey committee.

Economic activity in the U.S. service sector edged up slightly in August after contracting in July, according to the ISM's nonmanufacturing index. The index rose to 50.6 in August from 49.5 in July with readings above 50 indicate expansion.

The employment portion of the nonmanufacturing index fell to a reading of 45.4 in August from 47.1 in the previous month.

In the week ended Aug. 30, the advance figure for seasonally adjusted initial unemployment claims was 444,000, the U.S. Department of Labor reported. The four-week moving average was 438,000, an increase of 45,000, or 11.5% from the previous month's average 393,000. A Department of Labor program to locate those who may be eligible for jobless benefits may have contributed to the recent rise in these numbers.

Meanwhile, The Conference Board's U.S. leading index of economic indicators fell 0.7% in July, its most recent reading. It now stands at 101.2. The organization said weaknesses among leading indicators continue to be widespread.

However, one bright spot in the economic picture was the upward revision of second-quarter growth in real gross domestic product by the U.S. Department of Commerce on Aug. 28. Real GDP grew at a rate of 3.3% in the second quarter, according to the revision, up from an earlier estimate of only 1.9%.

Staffing Industry Analysts' perspective
Overall, there appeared little good forward-looking news from the economic indicators in August.

Both the manufacturing and non-manufacturing indices are at about 50, meaning flat performance, neither growth nor contraction. Jobless claims rose 11.5% from the previous month, but it's unclear whether the increase is real or simply reflects a new program on the part of the Department of Labor to aggressively seek applications for unemployment claims by locating those unemployed. More troubling is the consistently negative character of two forward-looking indices, the ECRI and the leading index.