Jobless Claims Allay Concern on U.S. Job Market: Economy

Claims for unemployment benefits declined last week to the lowest level in a month, easing concern that the U.S. labor market is faltering.

First-time claims dropped by 1,000 to 367,000 in the period ended May 5, the Labor Department said today in Washington. Other reports showed that a gauge of consumer confidence declined to a three-month low, and the trade deficit widened on rising demand for imports from oil to autos.

Claims are returning to levels reached in February and March, indicating a surge last month probably reflected difficulty in adjusting the data for an Easter holiday that came earlier this year than last. Declines in dismissals point to a brighter labor market that would help sustain consumer spending after payroll growth slowed last month.

“The health of the labor market is improving,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. Hoffman is the most accurate forecaster of payrolls in the two years ended in March, according to Bloomberg data. “It gives me a little bit of encouragement that the May employment report won’t be a third-strike-you’re-out type of number.”

Stocks rose as Greece attempted to form a new government to try and remain in the euro area. The Standard & Poor’s 500 Index climbed 0.3 percent to 1,357.99 at the close in New York.

The median forecast of 47 economists surveyed by Bloomberg News called for 368,000 applications last week. Estimates ranged from 345,000 to 380,000. The Labor Department revised the previous week from 365,000.

Since February

The latest week’s figure compares with an average of 373,000 claims since the end of February. Initial jobless claims reflect weekly firings and tend to fall as job growth --measured by the monthly non-farm payrolls report -- accelerates.

American employers added fewer workers than forecast in April and the jobless rate unexpectedly fell as people left the labor force, the Labor Department said on May 4. Payrolls climbed 115,000, the smallest gain in six months, after a 154,000 March increase.

At the same time, in markets where the employment has improved, business is picking up.

“Although national job growth numbers have been uneven and a bit disappointing over the past few months, we are seeing much improved employment trends in many of our markets,” Allan Merrill, president and chief executive officer of Beazer Homes USA Inc. (BZH) in Atlanta, said in a May 2 earnings call.

Consumer Confidence

A rebound in job growth would help shore up consumer confidence, which fell in the week ended May 6 to the lowest level since early February. Consumer spending accounts for about 70 percent of the economy.

The Bloomberg Consumer Comfort Index declined to minus 40.4, a level associated with recessions or their aftermaths, from minus 37.6 in the previous period. The gauge has declined for three straight weeks and given back more than half its gain from the end of 2011 through mid-April.

Two of the index’s three components declined. The gauge of personal finances fell to minus 11.2, the weakest reading since November, from minus 6.6. A measure of whether consumers consider it a good or bad time to buy slipped to minus 45.8, a three-month low. Americans’ views on the state of the economy were little changed at minus 64.2.

The comfort index’s 9-point decline since April 15 also marks the biggest three-week slide since March 2011. The gauge reached a four-year high in the week ended April 15.

‘Economic Discontent’

Readings lower than minus 40 are correlated with “severe economic discontent,” according to Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg. The gauge has averaged minus 15.3 since its inception in December 1985.

“It’s clear that 2012 will present its share of challenges,” Carl Camden, president and chief executive officer of Kelly Services Inc., a staffing agency, said yesterday during an earnings call. “To be certain, the U.S. economy is recovering but at a stubbornly slow pace. Large companies still aren’t spending and adding jobs as quickly as would’ve been expected.”

Today’s Commerce Department figures on the trade deficit pointed to strong domestic demand as U.S. consumers and companies bought imported crude oil, computers, automobiles and televisions.

The deficit widened 14 percent to $51.8 billion. The median estimate of economists surveyed by Bloomberg called for an increase to $50 billion. A 5.2 percent jump in imports, the biggest in more than a year, swamped the 2.9 percent gain in exports, which also reached a record.

Consumer Spending

The trade report “is an indication that consumer spending has remained quite strong in March,” said Millan Mulraine, a senior U.S. strategist at TD Securities in New York. “We should see some of that positive momentum carry into the second quarter.”

The pickup in the value of imports reflected higher fuel prices and a bounce back in shipments from China following the week-long Lunar New Year celebrations amid increasing consumer spending. Sales by American companies to counterparts in Mexico, the European Union and South Korea reached the highest ever, giving no indication of a slowdown in global demand.

Imports from China climbed 12 percent in March after plunging the prior month as the Lunar New Year holidays extended into early February. The March trade gap with China widened to $31.5 billion from $28.1 billion, today’s report showed.

During a trip to China last week Treasury Secretary Timothy F. Geithner hailed a strengthening in economic ties. There was little evidence of tensions over exchange-rate policy, with Geithner in his closing remarks calling Chinese moves toward a more flexible currency “significant and promising” and likely to lead to gains against the dollar and other major currencies.

To contact the reporters on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net; Timothy R. Homan in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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