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Economy May Show Slight Growth; Jobless Claims Up

A gauge of future economic activity edged higher in September, suggesting the economy may continue to trudge forward at a modest pace despite a worsening housing slump.

This news follows a separate report that showed an unexpected jump in the number of workers filing new claims for jobless aid, potentially signalling a weakening labor market.

The Conference Board said Thursday its index of leading economic indicators rose 0.3 percent in September to 137.9, slightly below analysts' consensus forecast for a 0.4 percent rise. The modest growth follows a sharp 0.8 percent drop in August. The index has been erratic this year - rising one month and falling the next - but overall, growth has been flat.

The index is designed to predict economic activity in the coming three months.

Seven of the 10 data points tracked by the Conference Board increased last month, the strongest of which were vendor performance, the job market and stock prices. The housing market continued to lag.

Separately, the number of workers filing new claims for jobless aid jumped by 28,000 last week, far more than anticipated and the biggest increase for any week since February, the Labor Department said Thursday.

The higher claims data may increase the chances that the Federal Reserve will further reduce official interest rates to stimulate the economy.

Initial claims for state unemployment insurance benefits totaled 337,000 in the week ended Oct. 13 following an upwardly revised 309,000 in the prior week. Economists surveyed by Reuters had forecast a much lower total of 314,000 claims last week.

The weekly claims figures are volatile but the latest numbers add to other signs of a slowing economic pace, including reduced starts on new homes.

Analysts said rising new claims were consistent with other evidence that slower growth was taking a toll on job opportunities.

"It seems to be finally showing up," said Keith Hembre, chief economist for FAF Advisors in Minneapolis. "Everything else has been pointing to a softer job market. Maybe this is finally a sign that it's catching up with the other labor indicators."

Robert Macintosh, chief economist for Eaton Vance Management in Boston, said the claims data was "more fuel for the Fed to make another cut" in interest rates when policy-makers meet at the end of this month.

Labor department officials said no special factors were involved in last week's surge in claims but said some seasonal volatility might have affected the statistics. The last time there was a larger weekly increase in new claims filed was in the week ended Feb. 10 when that figure soared by 42,000.

The number of so-called continuing claims rose to 2.53 million from 2.52 million in the week ended Oct. 6, the latest period for which figures were available. The continuing claims total was in line with economists' forecasts.

The impact of a slumping U.S. housing sector began to show up clearly as widespread layoffs were reported in construction industries for the week ended Oct. 6.

The slumping housing sector likely accounted for many of the layoffs as builders trimmed back their plans in the face of a subprime mortgage crisis that has resulted in rising foreclosures and reduced sales. The government also noted layoffs in the automobile and manufacturing industries.

California alone reported more than 6,000 new claims in that week, and the department cited layoffs in construction, service, finance, insurance and real estate industries.

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