MercoPress. South Atlantic News Agency

United States economic misery continues

The US economy has been hit hard by the housing crisis

The US economy is continuing its economic downturn although it would be “premature” to officially declare a recession, the Organisation for Economic Co-operation and Development (OECD) has said.

"The US economy is now essentially moving sideways, if not contracting outright," the OECD said on Thursday. "It may be premature to declare a recession, but with the pace of activity so far below potential, economic slack is widening rapidly." The news comes as the US department of labour said jobless claims had risen to 378,000, up from 356,000 the week before. The department's report said the total number of payroll jobs fell by 63,000 in February, an even bigger decline that the drop of 22,000 jobs in January - the first monthly decline since mid-2003. US stocks closed higher on Thursday, with the Dow Jones rising 268 points, or 2.2 per cent to 12,368.15, while the Nasdaq rose 47.5 points, or 2.1 per cent, to 2,257.51. The OECD revised its growth forecast for the US for 2008, saying the economy was likely to grow 1.4 per cent, down from the December estimate of 2.0 per cent. The institution also slashed its forecast for first quarter gross domestic product (GDP) in the US to 0.1 per cent and predicted that the GDP would be flat in the second quarter. "The US economy is going to be very weak" over the first two quarters, Jorgen Elmeskov, acting OECD chief economist, told a news conference "[however Europe] will be in nowhere near the same camp as the US." Elmeskov also warned that the US housing market collapse "has further to go" and would probably turn out to be the worst in OECD records. "There will be falling house prices for some time to come," he said. The US economy has been battered by rising gas prices, falling home prices related to the subprime mortgage scandal, turmoil in the global financial markets and tightening credit markets, which have forced consumers and businesses to cut spending. The report also praised action by the US Federal Reserve and US government to boost the US economy through lower interest rates and a fiscal injection. It said that Europe would not need such a stimulus, while in Japan there was "limited scope" for action on economic weakness. The OECD said that Europe's growth would remain unchanged for the neat 1.5 per cent and Japan's would fall to 1.5 percent from 1.6 per cent. Also on Thursday, the Conference Board, a business-backed research group, said its index of leading economic indicators fell in February for the fifth consecutive month. The index, designed to forecast where the nation's economy is headed in the next three to six months, dipped 0.3 per cent to 135.0 in February after slumping 0.4 percent the month before.