Latest indicators show weakness in economy persists
Thursday, February 18, 2010; 12:20 PM
Wholesale prices spiked in January, and the pace of job cuts rose last week, according to new data released Thursday that paint a gloomy picture of the economy's performance this winter.
Although most indicators show that the economy continued to expand at the beginning of 2010, the latest readings show undercurrents of both continued weakness in the job market and a rise in fuel prices that could drain Americans' wallets.
The producer price index rose a surprising 1.4 percent in January, the Labor Department said, primarily due to higher energy prices. But there were signs of wholesale inflation even apart from higher prices for gasoline, heating oil and other forms of energy. Core inflation, which excludes volatile food and energy prices, rose 0.3 percent, driven by a 1.3 percent rise in pharmaceutical prices.
The Labor Department will release its consumer price index for January on Friday morning.
Economists generally view inflation as little threat in the near future, but that view could change if the latest producer price reading turns into a broader trend of rising prices. Such a situation would put the Federal Reserve in a difficult situation. The central bank's leaders have said they intend to leave their target interest rate "extremely low" for an "extended period," but sharply rising prices would limit their ability to follow through on that intention.
Also Thursday, the Labor Department said that 473,000 people filed new claims for unemployment insurance benefits last week, up from 442,000 the previous week. That is a worrisome sign that the job market might not be improving at the pace forecasters hope.
The four-week moving average of jobless claims, which eliminates weekly volatility, was 467,500, down 1,500 from the previous week.
The February employment situation will remain murky for some time, though, as extreme snowstorms in the Northeast and parts of the South and Midwest could cause a burst of temporary joblessness -- construction workers who weren't able to come to work, for example, or retail clerks whose employer shut down for several days.
In a more positive sign about the economy, the Federal Reserve Bank of Philadelphia's index of manufacturing activity rose to 55.1 from 52.5. Numbers above 50 indicate expansion.
The index suggests that, at least in the Eastern Pennsylvania-New Jersey-Delaware area covered by the survey, the snowstorms have not affected industrial output much.