Slowdown looking like herald of a recession

NEW YORK — The slowdown in the U.S. economy, coupled with a steady drip of bleak economic data, is starting to echo the conditions that presaged the nation's most recent recession.

Data released Thursday by the business group the Conference Board showed its gauge of future business activity dropped for the fourth month in a row January. Its index of leading economic indicators has now fallen 2.0 percent over the last six months, the biggest drop since early 2001.

The index is designed to forecast where the nation's economy is headed in the next three to six months — and persistent, pronounced declines signal that a recession may be around the corner.

"The conditions are nearing those that historically preceded recessions," said Ataman Ozyildirim, an economist at the Conference Board. "Every recession is a bit different, but we're becoming more confident that we're nearing those conditions."

The figures, in conjunction with downbeat news about manufacturing and a murky employment picture, sent the Dow Jones industrial average down more than 140 points Thursday as investors feared the onset of a recession. The Dow fell 142.96, or 1.15 percent, to close at 12,284.30. Broader indexes also closed lower.

Markets had been hoping for economic data to show the economy wasn't shrinking but signaling enough weakness to spur the Federal Reserve to again slash interest rates in March.

Some dour news came from the Philadelphia Federal Reserve, which reported a much lower-than-expected manufacturing index for February.

While the Labor Department reported a drop in the number of newly laid-off workers filing claims for unemployment benefits, it was seen as only a temporary improvement. Analysts noted that claims offices in California were closed for a day last week for a state holiday, giving laid-off workers less time to file claims.

The four-week average for claims, which gives a better picture of labor-market trends, rose to 360,500 — the highest level since claims spiked in October 2005.

The Conference Board report came a day after the Federal Reserve released its updated forecast for slower economic growth, higher unemployment and higher inflation. The dismal outlook for the year was despite the central bank's aggressive interest rate cuts in January.

The Fed maintains the country could avoid a recession, which is generally defined as two consecutive quarters of economic contraction. Some private analysts, however, say the economy has already entered a downturn and expect it to last through the spring.