The number of Americans filing first-time claims for jobless benefits last week held at a four-year low and consumers became more confident, indicating an improving labor market may boost household spending.
Applications for unemployment insurance benefits were unchanged in the week ended Feb. 18 at 351,000, the fewest since March 2008, Labor Department figures showed today. The Bloomberg Consumer Comfort Index rose to minus 38.4 in the week to Feb. 19, the strongest reading since April 2008.
“The labor market is better, and a stronger labor market and stronger consumer spending go hand in hand,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “Consumers are going to continue to spend.”
The best January for the Dow Jones Industrial Average since 1997 has also boosted optimism among households, whose purchases makes up 70 percent of the economy. A majority of consumers rated their personal finances as positive for the first time since July, the comfort survey showed.
The Standard & Poor’s 500 Index gained 0.4 percent to 1,363.46 at the close in New York. The index is up 8.4 percent for the year. The Dow also rose 0.4 percent, to close at 12,984.69. The yield on the 10-year Treasury note was little changed at 2 percent.
The median projection in a Bloomberg News survey of 47 economists called for 355,000 claims, marking the fourth straight week that the figures have been better than forecast. The Labor Department initially reported the prior week’s applications at 348,000.
Last week included the 12th of the month, which coincides with the period the Labor Department uses in its survey of employers to calculate monthly payroll growth. The February employment report will be released March 9.
The unemployment rate in January dropped to 8.3 percent, the lowest in three years, and employers added 243,000 workers to payrolls, the most in nine months.
The number of people on unemployment benefit rolls dropped to the lowest level since August 2008, today’s report also showed. Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates.
Those who have used up their traditional benefits and are now collecting emergency and extended payments decreased by about 69,000 to 3.41 million in the week ended Feb. 4.
Congress voted last week to maintain expanded unemployment benefits through Dec. 31. The $30 billion extension gradually reduces the number of weeks recipients can receive benefits, down from the current 99 weeks, according to separate summaries provided by Democrats and Republicans on the House Ways and Means Committee.
President Barack Obama signed the bill into law yesterday. The measure also extended a two percentage-point tax cut and avoided a cut in doctors’ Medicare reimbursements.
“Wherever we have an opportunity, we’re going to take steps on our own to keep this economy moving,” Obama said earlier this week.
An economy that’s expanding faster may stimulate more hiring. Macy’s Inc., the second-biggest U.S. department-store chain, may hire about 4,000 employees this year, matching the number of additions it made last year.
“Given that our business is growing, we are of course hiring,” Jim Sluzewski, a spokesman for the Cincinnati-based retailer, said in a Feb. 17 e-mail. “We added about 4,000 total positions in 2011 and my presumption is that it will be roughly similar in 2012 but planning is ongoing.”
Two of three components of the weekly Bloomberg Consumer Comfort Index improved. A gauge of the buying climate increased to minus 42.7, the highest since January 2011, from minus 47.4. The measure of personal finances was little changed at 1, the highest since July, after a reading of 0.2, with 51 percent rating their finances as positive. The measure of Americans’ views on the state of the economy fell to minus 73.3 from minus 72.1 the prior week.
“An improving labor market and rising equity prices have bolstered sentiment of survey participants, especially those in the upper-middle and wealthy classes,” said Joe Brusuelas, a senior economist at Bloomberg LP in New York.
The comfort index has a “strong long-term correlation” of 0.81 with the Dow Jones Industrial Average, Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement.
The index has a minus 0.63 correlation with jobless claims and a minus 0.79 correlation with unemployment, according to Langer. The index has a 0.67 correlation with housing starts, which were up in January from the prior month as well as from a year earlier.
A correlation of 1 means components move in tandem, while a reading of minus 1 means they move in the opposite direction all the time.
Higher gasoline costs may limit further gains in sentiment. The price of a gallon of regular unleaded gasoline climbed to $3.57 as of Feb. 19 from a 10-month low of $3.21 in December, according to AAA, the nation’s largest automobile association.
The comfort index reached its highest level in almost a year among Republicans, at minus 34.7. Among political independents, considered a key group in presidential elections, the gauge is 10.7 points higher than when President Barack Obama took office in January 2009.
The weekly Bloomberg comfort index, which began December 1985, has averaged minus 43.3 this year following last year’s minus 46.8 average. That compared with minus 45.7 for 2010 and minus 47.9 in 2009, the worst full-year reading on record.
The index is based on responses to telephone interviews with a random sample of 1,000 consumers 18 years old and older. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; the percentage of negative responses is subtracted from the share of positive views and divided by three. The most recent reading is based on the average of responses over the previous four weeks.
The index can range from 100, indicating every participant in the survey had a positive response to all three components, to minus 100, signaling all views were negative. The margin of error for the headline reading is 3 percentage points.
Field work for the index is done by SSRS/Social Science Research Solutions in Media, Pennsylvania.