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Conference Board index provides hope
Holding out hope that the U.S. economy could emerge from recession within the next three months, a key economic index recorded its single largest gain in almost six years during December.
The Conference Board's index of leading economic indicators, a key forecasting tool, jumped up by 1.2 percent in December, following another sturdy gain of 0.8 percent in November. The December increase was the largest one-month gain posted since February 1996.
"The fact that the increase was so strong in December, the fact that the index was up strongly in November, the longevity of the increase and the breadth throughout different sectors of the economy all go along with expectations that in one, two or three months the recession will be over," said Ken Goldstein, chief economist of The Conference Board. "We're not there yet, but we will be relatively soon."
Among the surprises in the report, said Goldstein, were the speed with which consumer expectations have bounced back after the Sept. 11 terrorist attacks, and the big decline in initial jobless claims.
The December results came in well ahead of expectations, with most Wall Street economists forecasting a gain of 0.8 percent.
Goldstein said the Federal Reserve's aggressive monetary policy, along with growth in the monetary supply, retail discounts and a drop in energy prices, all combined to contribute to "the re-emergence of economic momentum."
Eight of the 10 components that make up the index climbed in December, with the greatest improvement shown in jobless claims, the Treasury yield curve, money supply and the average work week. Only two index components fell back, capital spending and manufacturers' new orders.
Small businesses sees hiring spike
A fourth-quarter spike in hiring by small businesses could be a signal that the economy is poised to rebound in a replay of the hiring pattern that signaled the end of the 1990-91 recession, said Challenger Gray & Christmas, the international outplacement company that tracks layoffs and hiring trends nationwide.
Challenger said that 67 percent of job seekers went to small businesses in the closing quarter of 2001, a steep 22 percent increase from the second quarter increase of 55 percent, which came on the heels of the recession's official start in March.
"The recovery from recession, which began in April 1991, was preceded by a first-quarter jump in the percentage of job seekers going to small firms to 69 percent, 30 percent higher than the 53 percent recorded two quarters earlier," said the company.
"The similarity between the current situation and 1990-91 is not a coincidence," said John Challenger, ceo. "Small businesses are less insulated from changes in the economy compared to large corporations. Small businesses are simply better suited to react quickly to those changes because they lack the bureaucracy common in most large companies."
More evidence that small businesses are leading the way out of recession comes from new data on planned capital spending, he said. The percentage of small businesses planning capital spending during the next three to six months rose to 31 percent in December from 29 percent in November and 27 percent in October, according to a monthly survey of 2,500 small businesses conducted by the National Federation of Independent Business.
"Increased and consistent new capital spending is considered by many to be a key to economic recovery," he said. "The fact that we are seeing small businesses increasing such outlays is a positive sign."
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