Leading economic indicators up more than expected

NEW YORK -- A private research group's forecast of economic activity rose in May by the largest amount in more than five years, the latest sign that the recession is easing.

The Conference Board said Thursday that its index of leading economic indicators — designed to forecast activity in the next three to six months — rose 1.2%, the biggest gain since March 2004. Economists surveyed by Reuters expected a 0.9% increase in May.

The New York-based group said activity in the six-month period through May also rose 1.2% — the first time that measure has grown since April 2007. The April reading was also revised, up to a 1.1% gain from 1%.

"The recession is losing steam," said Conference Board economist Ken Goldstein. "If these trends continue, expect a slow recovery beginning before the end of the year."

However, Goldstein said the job market will take longer to rebound.

The Labor Department on Thursday said the total number of people filing for unemployment insurance fell by 148,000 to nearly 6.7 million in the week ending June 6. That was the largest drop in more than seven years and snapped a streak of 19 straight record-highs. Initial claims for jobless aid, meanwhile, rose 3,000 to a seasonally adjusted 608,000 last week.

Seven of the Conference Board index's 10 components grew in May, including money supply, building permits, consumer expectations, stock prices and vendors' deliveries of supplies to companies.

Employment factors — claims for jobless aid and weekly manufacturing hours — weighed down the index, as did the level of manufacturers' orders for consumer goods.

Some economists say the recession may be followed by a "jobless recovery," as skittish employers remain reluctant to hire, even as their business improves. That shows "how deep a hole we're in," Goldstein said.

The May report, while it signals an end to the recession this year, doesn't mean the country won't spend a while in a "relatively weak economic environment," he said.