U.S. Economy: Spending Rises, Jobless Claims Decline
U.S. Consumer Spending Increased 0.4% in October
Jin Lee/Bloomberg
More jobs and bigger paychecks may give consumers the confidence to boost purchases during the holiday season, benefiting retailers like Wal-Mart Stores Inc.
More jobs and bigger paychecks may give consumers the confidence to boost purchases during the holiday season, benefiting retailers like Wal-Mart Stores Inc. Photographer: Jin Lee/Bloomberg
Nov. 24 (Bloomberg) -- Ethan Harris, head of developed-markets economic research at Bank of America Merrill Lynch, and Bloomberg economist Joseph Brusuelas, talk about the U.S. labor and housing markets. Harris and Brusuelas, speaking with Matt Miller on Bloomberg Television's "Street Smart," also discuss the Federal Reserve's policy of quantitative easing. (Source: Bloomberg)
Nov. 24 (Bloomberg) -- Adrianne Shapira, an analyst at Goldman Sachs & Co., talks about the outlook for Black Friday retail sales. Shapira speaks with Margaret Brennan on Bloomberg Television's "InBusiness." (Source: Bloomberg)
Nov. 24 (Bloomberg) -- Craig Johnson, president of Customer Growth Partners LLC, talks about the outlook for U.S. retail sales during the holiday season. Johnson speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Nov. 24 (Bloomberg) -- Applications for unemployment benefits in the U.S. declined by 34,000, more than forecast, to 407,000 in the week ended Nov. 20, according to the Labor Department. Consumer spending rose in October for a fifth month as a rebound in incomes lifted the biggest part of the U.S. economy at the start of the final quarter of 2010, Commerce Department figures showed. Orders for goods meant to last several years unexpectedly fell 3.30 percent. Bloomberg's Michael McKee and Betty Liu report. (Source: Bloomberg)
Americans increased spending for a fifth month in October and filed the fewest unemployment claims in more than two years last week, pointing to strength in the largest part of the economy as the fourth quarter began.
Household purchases advanced 0.4 percent after a 0.3 percent gain in September that was larger than previously estimated, the Commerce Department reported today in Washington. Incomes climbed 0.5 percent. Jobless claims fell by 34,000 to 407,000 in the week ended Nov. 20, Labor Department figures showed.
Stocks rallied and Treasuries declined as the reports, along with a better-than-forecast increase in consumer sentiment, boosted the outlook for holiday-season spending at retailers including Wal-Mart Stores Inc. A slowdown in inflation validated the Federal Reserve’s case for a second round of unconventional monetary stimulus.
“It really looks like a recovery here,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Wages and salaries are strengthening, and we have really good momentum going into the holiday season.”
The Standard & Poor’s 500 Index rose 1.5 percent to 1,198.35 at the 4 p.m. close in New York. The yield on the benchmark 10-year note increased to 2.92 percent from 2.78 percent late yesterday.
The median estimate of 77 economists surveyed by Bloomberg News called for a 0.5 percent advance in consumer spending. Jobless claims were forecast to fall to 435,000, a separate survey showed.
Consumer Sentiment
The Thomson Reuters/University of Michigan final index of November consumer sentiment increased to 71.6, the highest since June, from 67.7 a month earlier. The preliminary November figure was 69.3. Economists projected a reading of 69.5.
Other reports today from the Commerce Department showed that orders for goods meant to last several years and new-home sales both unexpectedly decreased in October, illustrating the uneven nature of the recovery from the worst recession since the Great Depression.
Demand for so-called durable goods dropped 3.3 percent after a revised 5 percent jump in September that was larger than previously estimated. Purchases of new homes decreased 8.1 percent to a 283,000 annual rate. Sales reached a 275,000 pace in August, the lowest since data collection began in 1963.
Retailers are projecting a better holiday shopping period and are increasing discounts to attract more consumers. The National Retail Federation has forecast November-December holiday sales will rise by 2.3 percent from a year ago, the most since 2006.
Black Friday
Bentonville, Arkansas-based Wal-Mart, the world’s largest retailer, said this week it will match prices listed in competitors’ ads on Black Friday, the day after the Nov. 25 Thanksgiving holiday. Savings will run through Nov. 27, with deals on electronics, home items and apparel.
Auto dealers are among retailers seeing stronger demand. Car sales in October rose to a 12.25 million unit annual pace, the highest since the government’s cash-for-clunkers program in August 2009, industry data showed this month.
“The sales rate has been improving at a modest rate, each quarter moving up a little bit,” George Pipas, U.S. sales analyst at Ford Motor Co., said on a Nov. 3 conference call. “October’s results suggest that that trend could continue in the fourth quarter.”
Views on Unemployment
Still, the labor market may not be healing fast enough to push down joblessness lingering near a 26-year high. While Americans said news about the job market was more favorable in November, most don’t expect much improvement in the unemployment rate, according to today’s University of Michigan survey.
“The jobs recovery is not going to be accelerating any time soon,” said David Resler, chief economist at Nomura Securities International Inc. in New York. “I don’t see a significant recovery to the jobs that have been lost” during the recession that ended in June of last year.
Fed policy makers raised their unemployment forecasts for the fourth quarter of next year to a range of 8.9 percent to 9.1 percent, compared with 8.3 percent to 8.7 percent in their previous forecast in June, according to minutes of their Nov. 2- 3 meeting released yesterday.
At the meeting, policy makers led by Chairman Ben S. Bernanke decided to buy $600 billion of Treasury securities through June in a bid to reduce unemployment and keep the inflation rate from falling further.
Today’s personal-spending report showed that wages and salaries advanced 0.6 percent in October, the biggest gain since May. Disposable incomes, or the money left over after taxes, rose 0.3 percent after adjusting for inflation.
Savings Rate
The savings rate increased to 5.7 percent from 5.6 percent, even as spending climbed, showing how growing incomes are helping American households repair tattered finances.
The Fed’s preferred price measure, which excludes food and fuel, was unchanged from the prior month and was up 0.9 percent from a year earlier, the smallest gain since records began in 1960. Adjusted for inflation, which is the figure used to calculate gross domestic product, consumer spending increased 0.3 percent after a 0.2 percent increase the prior month.
Bookings for durable goods excluding transportation equipment decreased 2.7 percent in October. They were forecast to increase 0.6 percent, according to the Bloomberg survey.
Orders for non-defense capital goods excluding aircraft, considered a proxy for future business investment, fell 4.5 percent after a 1.9 percent gain in September. The government had previously estimated such orders dropped 0.2 percent in September.
The swings in orders for capital goods may reflect calendar effects that the government isn’t able to capture with its seasonal adjustments, economists said.
“Business investment is slowing, but the numbers we got today might overstate the magnitude,” said Brian Jones, an economist at Societe Generale in New York.
To contact the reporters on this story: Bob Willis in Washington at bwillis@bloomberg.net; Shobhana Chandra in Washington at schandra1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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