Friday, November 18, 2011

US economy shows signs of life, but risks abound

There were compelling signs this week that the U.S. economy is, ever so gradually, picking up speed. Keeping the recovery on track, though, will mean dodging several very large obstacles that could derail it again.

The latest piece of upbeat news came from the Conference Board, which said Friday that its index of leading economic indicators jumped by 0.9 percent in October, up sharply from a 0.1 percent increase in September and a 0.3 percent rise in August.

The private research group said much of the increase was due to a rise in building permits for future construction, which jumped nearly 11 percent in October, to the highest level since March 2010.

The dismal housing market has been one of the main dampers on the U.S. economic recovery. Now, four years after the new housing market all but shut down, home construction is showing signs of life. On Thursday, the Commerce Department reported that single family housing starts jumped 3.9 percent in October. A separate report by an industry group found that homebuilders are getting more optimistic than they've been since May 2010.

"I think everyone is feeling a little more confident in what they think future looks like," said Frank Sorrentino, CEO of North Jersey Community Bank, which lends to home builders in Northern New Jersey. "I don't think anyone believes were falling off a cliff any more, and people are starting to think that 2012 may actually start to look like a decent year."

Other recent economic data -- on everything from jobs to retail sales -- are pointing to an improved outlook for next year. New claims for unemployment insurance, which tend to track the pace of layoffs, fell to 388,000 in the latest week, a seven-month low. It was also the fourth decline in five weeks. That's a sign that the job market has at least stabilized.
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