Summary The Leading Economic Index (LEI) fell 0.3% in January, signaling the end of a 10-month streak of positive gains that pushed the index to its highest level in the series’ history. Most of the softness can be chalked up to jobless claims experiencing their first monthly increase in a year, but we do not see this print as a significant warning sign in the labor force, as the level of claims remains historically low. Increase in Jobless Claims Break a 10-Month Winning Streak The Leading Economic Index (LEI) fell 0.3% in January, only its second monthly decline since April 2020. This signaled the end of a 10-month streak of positive gains that pushed the index to 120, its highest level in the series’ history (chart). While there were certainly many economic changes occurring in January, in this case, most of the softness can be chalked up to one line item: jobless claims. The rise in monthly initial jobless claims in January, its first increase in a year, subtracted a notable 0.31 percentage points (pp) from headline growth. While it may be enticing to pin the decline on the Omicron variant, which could have encouraged a lack of re-entry into the workforce, this print likely has more to do with base effects from December than a significant warning sign in the labor force. The monthly average of jobless claims in January was only 246K, and most recent figure rolled in at 248K for the week ending February 12, both of which fall below the over 300K averaged during the 2010-2019 cycle (chart). While it may be factored in as a larger hit, in many ways January primarily showed payback after monthly jobless claims reached their lowest level in at least 50 years in December. In all the 10 straight positive months leading up to this print, jobless claims lend a helping hand, and ranked as the top contributor for four of those months. READ FULL ARTICLE>>
