The U.S. economy returns today with some economic fundamentals that should provide us with further hints over the outlook for the world’s largest economy, as data from the labor and manufacturing sectors should highlight the recent improvement, while the leading indicators should continue to signal that the outlook is better and that the economy is on its way to recovery.

 

The U.S. Labor Department will release the weekly jobless claims for the week ending August 15, as initial jobless claims are expected to drop by 8,000 to 550,000 from the prior estimate of 558,000, while continuing claims are expected to rise in the week ending August 8 to 6.215 million from the prior estimate of 6.202 million.

 

The labor market in the United States remains on the receiving end of this recession, as despite the drop in unemployment witnessed back in July, as unemployment dropped to 9.4% from 9.5% marking the first drop in unemployment since April 2008, yet unemployment is still expected to rise over the course of the upcoming few months, as companies continue to reduce their workforce to survive the current difficult conditions.

 

Rising unemployment will surely affect economic growth, as it would affect personal income levels and accordingly consumer spending would drop, noting that consumer spending counts for nearly 2/3 of economic activity in the United States, which means that economic growth will remain weak even if the economy starts to recover.

 

Meanwhile, the leading indicators which is considered to be a gauge for future activity in the upcoming 3 to 6 months is expected to rise by 0.7% in July inline with the prior reported rise, which signals the economy continues to show further signs of improvement, and accordingly we might expect further stabilization to be the dominant theme over the upcoming period.

 

The U.S. economy has been showing several signs that the worst part of this recession is over, as stabilization started to show in different economic sectors, including the housing, the services, and the manufacturing sectors, as the recent data released from these sectors signaled they are improving.

 

Moreover, the Philadelphia Fed index will be released for the month of August, the index is expected to show that activity in the Philadelphia region is also improving, as the index is expected to contract by 2.0 only up from the prior reported contraction of 7.5; and this further supports the recent wave of improvement that has been seen all around the economy.

 

The world’s largest economy is showing more signs that the worst is over, however we are still not out yet, as conditions remain challenging and accordingly we shouldn’t be too optimistic, yet we also don’t have to be too pessimistic as well, as the worst financial crisis since the Great Depression is fading away and it’s only a matter of time before the U.S. economy can lead other economies around the globe into prosperity…