Fewer Americans applied for unemployment benefits over the past month than at any time in seven years, a sign of a healthier labor market that’s helping brighten consumer sentiment.
The four-week average for jobless claims fell to 310,250 in the period ended May 31, the lowest since June 2007, a Labor Department report showed today in Washington. The weekly Bloomberg Consumer Comfort Index increased for the first time in five weeks.
Shorter unemployment lines at state agencies probably set the stage for more hiring as companies, already lean from prior job cutting, gear up for stronger demand. Greater employment opportunities are helping put more Americans at ease about spending, underscored by a jump in May auto sales that shows the economy is emerging from a first-quarter slump.
“The labor market is heading in the right direction,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. Moody’s is the top forecaster of jobless claims over the last two years, according to data compiled by Bloomberg. “The unemployment rate has come down pretty quickly over the last several months and that may be lifting consumer spirits.”
Employers probably added 215,000 workers in May, according to a Bloomberg survey median of economists before tomorrow’s report. Payrolls climbed 288,000 in April, the most since January 2012, while the unemployment rate fell to 6.3 percent, the lowest since September 2008.
“We need to see continued job growth,” said Kathleen Bostjancic, director of U.S. macro investor services at Oxford Economics USA Inc. in New York. “Rising wage growth is one of the missing keys here for the U.S. economy.”
The Bloomberg Comfort Index (COMFCOMF) rose to 35.1 from 33.3 a week earlier. The gauge is still 10.2 points below its pre-recession average of 45.3, according to Langer Research Associates LLC in New York, which conducts the survey.
“Sentiment is improving, but consumers are still not as happy as they were prior to the recession, which isn’t too surprising,” Sweet said. “For some consumers, it still feels like a recession.”
Stock indexes rose to records as European Central Bank stimulus boosted optimism in the global economy before tomorrow’s jobs report. The S&P 500 advanced 0.7 percent to 1,940.46 at the close in New York.
The Bloomberg comfort gauge measuring the buying climate climbed 2.7 points to 31.7 last week, marking the biggest increase since April 2013.
Americans’ views on their personal finances improved, with the index rising to 50.4 from 49.5. The gauge of the economy rose to 23.1 last week, the highest since April 27, from 21.4.
“Sentiment is hanging in there as Americans grow more confident in their financial conditions,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.
The U.S. economy is showing signs of a rebound after harsh winter weather contributed to a first-quarter slowdown. Gross domestic product fell at a 1 percent annualized rate from January through March, the worst performance since the same three months in 2011.
General Motors Co. this week posted its best month of U.S. sales since the 2008 financial collapse, joining other automakers reporting purchases that exceeded analyst estimates. Autos sold in May at a 16.7 million annualized rate, the strongest since February 2007, according to data from Ward’s Automotive Group.
Today’s figures from the Labor Department also showed jobless claims climbed to 312,000 in the week ended May 31 from 304,000 the prior period, in line with the median forecast of 310,000 in a Bloomberg survey.
The number of people continuing to receive jobless benefits dropped by 20,000 to 2.6 million in the week ended May 24, the fewest since October 2007. The unemployment rate among people eligible for benefits held at 2 percent the same week.
An improving labor market is among the reasons the Federal Reserve continues to cut monthly bond purchases. At their last meeting in April, policy makers said “participants generally expected further gradual improvement” in hiring, according to a May 21 statement.
A bounce-back in employment isn’t true for everyone. United States Steel Corp. is shuttering two factories in response to foreign competition, which could affect about 260 employees in Texas and Pennsylvania.
“The indefinite idling of these loss-making operations will reduce the number of U.S. Steel’s tubular facilities from 10 to eight, but will enable the company to operate more profitably,” according to a June 2 release.
Manufacturing as a whole is picking up. The Institute for Supply Management’s factory index rose to 55.4 in May from the prior month’s 54.9, expanding at the fastest pace this year, a report showed earlier this week.
The Institute’s non-manufacturing index showed yesterday that services are also rallying, climbing to 56.3 last month from 55.2 in April. Readings above 50 signal expansion.
“At this level of business activity and new orders in the pipeline, the employment is going to have to go up,” Anthony Nieves, chairman of ISM’s non-manufacturing survey committee, said on a conference call with reporters.