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Drops in index, jobless claims

NEW YORK - Strained by a tight credit market, the nation's economy should stumble along at a slower pace in the coming months, but it may be helped by lower interest rates and possible employment gains.

U.S. Secret Service Uniformed Police division representatives talk with attendees at a Los Angeles job fair hosted by the FBI.
U.S. Secret Service Uniformed Police division representatives talk with attendees at a Los Angeles job fair hosted by the FBI.Read moreNICK UT / Associated Press

NEW YORK - Strained by a tight credit market, the nation's economy should stumble along at a slower pace in the coming months, but it may be helped by lower interest rates and possible employment gains.

The Conference Board said yesterday that its index of leading economic indicators dropped 0.6 percent in August, slightly more than the 0.5 percent that analysts were expecting.

The drop was offset by a revised 0.7 percent rise in July.

While the index has jumped up and down recently, the cumulative change over the last six months has been a 0.5 percent rise.

That is consistent with the modest growth of the nation's gross domestic product at about 2 percent in the second quarter, analysts said. GDP is the broadest gauge of the economy, measuring the value of all the goods and services produced within the country.

Also yesterday, the Labor Department said jobless claims declined to the lowest level in seven weeks, surprising analysts who were expecting a jump.

"That shows there's firm demand for labor despite the turmoil in the marketplace," said Gary Bigg, associate economist with Bank of America Corp. "That's good news."

Together, the data indicate the economy will continue slow but steady growth, Bigg said.

The Conference Board report, taken from data collected before the Fed's rate cut earlier this week, may simply reflect the immediate effects of the clampdown in credit markets in August, analysts said.

The Conference Board report tracks 10 economic indicators. Only one of those indicators, real money supply, advanced in August.

The negative components, starting with the largest, were consumer expectations, jobless claims, stock prices, building permits, vendor performance, manufacturers' new orders for nondefense capital goods, interest-rate spread, and manufacturers' orders for consumer goods.

Weekly manufacturing hours held steady.

The report forecasts economic activity over the next three to six months.