Although foreign economies also have been affected by financial turmoil, and growth among our trading partners is showing some signs of slowing, expanding exports should continue to help support economic activity in the United States. In the labor market, private payrolls decelerated over the course of 2007 and were reported to have been unchanged in January.
The unemployment rate, after remaining near 4-1/2 percent in the first half of last year, has moved up about 1/2 percentage point to nearly 5 percent, its highest level since late 2005. And the labor market appears to have softened further in February. Initial claims for unemployment insurance, which can be a timely indicator of labor market activity, moved up appreciably in February.