Today, the Labor Department's Employment and Training Administration announced that during the week ending June 15 the number of new claims for state unemployment insurance fell slightly from 361,000 to 357,000. This was not enough to break the short-term uptrend in the widely-followed four-week moving average of new claims, which rose from 351,250 to 354,250.

The four-week moving average of new claims for state unemployment insurance is one of the eleven indicators that make up the Department of Commerce Composite Index of Leading Economic Indicators (LEI). A month-to-month decline in the four-week moving average makes a positive contribution to the LEI and vice-versa. After an extended decline, this indicator turned up on June 1 and has risen in the two subsequent weeks.

Over the last few weeks, in these articles, I have been speculating on the meaning of this reversal of direction. I hypothesized that perhaps this was indicating a slowdown in the rate of economic expansion. We saw some other evidence Tuesday that this indeed might be happening, when the Bureau of the Census reported that new home starts and building permits (another component of the LEI) had declined during May. If we get further hints of slowdown in the next couple weeks the Federal Reserve will probably vote to leave its short-term interest rate target unchanged for a while longer.

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Speaking of the Fed, yesterday it released the latest edition of its so-called Beige Book which describes economic conditions in the regions served by each of the twelve Federal Reserve district banks. Here's the overall summary, taken directly from the report:

"Reports from the twelve Federal Reserve Districts suggest economic activity continued to advance at a moderate pace in May and early June. Nearly all districts report expanding activity, and several indicate the pace of growth accelerated recently. The retail and service industries generally strengthened, and manufacturing activity improved in several districts. Residential and commercial construction activity also picked up in most districts, although wet weather hampered homebuilding in some areas. Loan demand increased in most districts, despite a decline in mortgage lending. In the natural resource industries, agriculture was hurt in several districts by unfavorable weather and low cattle prices, while energy activity increased in regions producing oil and natural gas. Several districts note rising prices for some raw and intermediate products, especially building materials, petroleum products, and grain. Evidence of rising prices for retail products, however, was much less widespread. Most districts continued to report tight labor markets for both entry-level and skilled workers, although indications of rising wages remained scattered."

If you would like your very own personal copy of the Beige Book, you can find it, along with lots more data on the economy, on the Federal Reserve Bank of St. Louis' FRED Database at http://www.stls.frb.org/fred/

In other Fed news, the Senate today approved Alan Greenspan for a third four-year term as chairman of the Federal Reserve. The last Fed chairman to be appointed to three or more terms was William McChesney Martin, who held the post for nineteen years from 1951-70.

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The Bureau of the Census and the Bureau of Economic Analysis, through the Department of Commerce, announced today that total April exports of $69.9 billion and imports of $78.6 billion resulted in a goods and services international trade deficit of $8.7 billion.

You may recall that exports minus imports is one of the primary factors that go into calculating the gross domestic product (GDP), the final measure of the performance of the nation's economy. If imports exceed exports, as they have for many years, then exports minus imports makes a negative contribution to GDP.

For the first four months of this year the deficit totaled $32.981 billion. Projecting this out over a 12-month period yields an annual deficit of $98.943 billion. This compares with a deficit for all of last year of $105.064 billion.

So, if the trade deficit continues to grow at the rate it has thus far this year, then this year the total deficit will subtract $6.121 billion less from the GDP than it did the year before. With the GDP currently running at a $6.8 trillion level, that wouldn't be a lot of help.

Byline: Lafferty (MF Merlin)