More Americans this month said the economy was improving than at any time in eight years as the job market picked up.
The share of households viewing the economy as heading in the right direction rose to 34 percent in March, the most since January 2004, pushing the Bloomberg monthly expectations gauge to a one-year high of 1. The weekly Bloomberg Comfort Index was minus 34.9 in the period ended March 18, down from a four-year high of minus 33.7 over the previous seven days.
“The sense that things have finally stabilized has clearly boosted confidence,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Downside risk to both the overall level of comfort and Americans perceptions of the direction of the economy remains” as fuel prices increase, he said.
The best six months of job growth since 2006 is probably behind the increase in optimism, raising the odds that the spending that accounts for about 70 percent of the economy will strengthen. Gains in incomes and employment may be among reasons households have so far been able to weather the jump in gasoline prices.
The weekly comfort index has been higher than minus 40 for the past six weeks, the longest stretch of readings above recession levels since the first half of 2008.
The number of Americans filing applications for unemployment benefits dropped last week to the lowest level in four years, reinforcing signs the labor market is improving, Labor Department figures showed today. Jobless claims decreased by 5,000 to 348,000 in the week ended March 17, the fewest since February 2008.
Stocks fell as manufacturing contracted in Europe and China, raising concern the global economy is slowing. The Standard & Poor’s 500 Index dropped 0.6 percent to 1,394.25 at 9:40 a.m. in New York.
The weekly measure of Americans’ views of the state of the economy rose to minus 64.9 last week, the best reading since March 2008, from minus 67.1 the prior week, today’s comfort report showed. The index of whether consumers consider it a good time to buy dropped to minus 38.6 from minus 33.7. The personal finances gauge fell to minus 1.3 from minus 0.5 the prior week.
The monthly expectations gauge jumped from a reading of minus 7 in February. It was at minus 45 as recently as October.
“The unusually steep rise in expectations, alongside improved ratings of current conditions, marks a strongly positive trajectory for consumer sentiment after its long slump,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. The question remains how long sentiment “can hold the line as the sign at the pump approaches $4,” he said.
Outlook for Unemployed
The improved chance of landing a job is helping brighten sentiment. Confidence among the unemployed rose to minus 44 last week, the highest since April 2008. Sentiment also climbed among those with a college degree, rising to the highest level since March 2008.
Payrolls grew by 227,000 in February, the third month of gains in excess of 200,000, Labor Department data show. The unemployment rate held at a three-year low of 8.3 percent following five consecutive declines. Worker pay jumped in the last six months of 2011 by the most in almost five years, according to data from the Commerce Department.
Sentiment is improving more among men than women as the male jobless rate falls faster. Unemployment declined 1.1 percentage points for men over the past year, compared with a 0.3 percentage-point drop for women.
Men Versus Women
Confidence among men was minus 28.2 last week, up from last year’s low of minus 51.3 reached in September. The measure for women, at minus 41.3, has climbed 15.2 points from its 2011 low.
Still, higher gasoline prices may be limiting gains in confidence. The average price of regular gasoline at the pump climbed to a 10-month high of $3.86 a gallon on March 20, according to AAA, the nation’s largest auto club. It’s climbed 58 cents this year.
“We’re beginning to see positive signs that the economy is improving,” Randy Potts, chairman and chief executive officer of Winnebago Industries Inc., said during a March 15 conference call. “Consumer confidence has been trending higher, and the jobless rate is improving. Both the stock market and housing markets are showing signs of improvement, but rising fuel prices do remain a concern.”
The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers 18 years old and over. 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 comfort 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.