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To: IQBAL LATIF who wrote (39709)	5/17/2001 10:48:09 AM
From: IQBAL LATIF	Respond to of 50167

On 28th April when weekly jobless claims hit 425,000 the market sold off big today it was a second week in a row that number had fallen and is seen leveling off.Initial claims for unemployment insurance fell last week to 380,000. This is the second consecutive weekly decline in jobless claims. Continuing claims for unemployment insurance during the week ending May 5 fell to 2,682,000 from 2,708,000. The level of claims continues to be indicative of a weak labor market environment, but it appears to have leveled off in recent weeks.

To: IQBAL LATIF who wrote (39709)	5/17/2001 10:51:26 AM
From: IQBAL LATIF	Respond to of 50167

The U.S. Index of Leading Economic Indicators rose by 0.1% in April, only the second increase in the last seven months. Last month’s decline in the leading index was revised slightly to -0.2% from -0.3%. While the leading index rose slightly, the coincident index, a barometer of the current state of the economy, was flat. The lagging index, a barometer of where the economy has already been, fell 0.3% in April. The U.S. index of leading indicators rose in April, while the coincident index held steady. April’s gain was only the second increase in the last seven months, but the second in the most recent four months. The lagging index, an indication of where the economy has already been, fell 0.3%, a smaller decrease than posted last month. The leading and lagging indexes suggest that the declining trend of past months may be lessening. This is a key feature to watch in the next three releases. Taken together, these three indexes suggest further weak growth ahead, but do not yet signal a recession is on the horizon. While the topline trends might lead one to be cautiously optimistic, other features of the report are far less positive. The range of index components that drove the leading index’s increase was particularly narrow. Only three of the ten indicators that make up the leading index supported the increase. In order of contribution, they were the interest rate spread, the money supply, and stock prices. The increase is thus largely driven by the Federal Reserve’s monetary policy. While this is good news in that it suggests that Fed policy easings, to date, have helped prevent the economy from slowing further, the narrow range of positive components also indicates that this nascent strength has not spilled over to other parts of the economy. The negative contributors to the index, in order of their size included: average weekly initial claims for unemployment, vendor performance, building permits, the index of consumer expectations, and manufacturers’ new orders for nondefense capital goods and materials. Manufacturing hours and new orders for consumer goods held steady. Accounting for revisions in past months, the leading index has fallen by less than 1% during the six months ending in April. For the leading index to indicate recession, two criteria must be met. First, there must be three consecutive months of declines. Second, there must be a 3.5% or greater annualized decline over a six-month period. While the economy met the first test last December, it did not cross the second threshold. Moreover, the six-month trend in the coincident index is still indicates a small gain, suggesting that the economy still has some resilience. On net, the leading, coincident, and lagging indexes signal that this period of weak growth will extend into the third quarter of this year. They do not, as of yet, signal a recession. In addition, the flat performance of the coincident index and narrow range of indicators driving the leading index’s increase signal that April’s small improvement is fragile. Should the economy receive a shock in the next two months, it is unlikely that it could weather the blow.