Data on jobless claims Thursday confirmed what U.S. consumers have been saying for the past three months: a strengthening job market is making Americans more confident.
The number of applications for unemployment insurance benefits plunged by 43,000 to 265,000 in the week ended Jan. 24, the fewest since April 2000, according to the Labor Department. The Bloomberg index of consumer comfort climbed in the seven-day period ended Jan. 25 to the highest level since July 2007.
The slump in claims, while probably overstated by seasonal fluctuations, helps ease concern that firings were inching up as companies fretted over slowing global growth. The confidence figures are the latest to show American households could potentially help the U.S. power past events abroad as falling gasoline prices and the lowest unemployment rate since mid-2008 propel spending.
“The labor market’s in good shape going into 2015 and looks like it will be in good shape for the rest of the year,” said Guy Berger, an economist at RBS Securities Inc. in Stamford, Connecticut, who projected a drop to 280,000. “There’s nothing wrong and almost everything right with the economy right now.”
Stocks fluctuated between gains and losses as investors scrutinized earnings amid concern over how plunging oil and a stronger dollar will affect corporate profits. The Standard & Poor’s 500 Index fell 0.1 percent to 1,999.81 at 12:55 p.m. in New York.
Federal Reserve policy makers on Wednesday boosted their assessment of the economy as the job market improved and fuel costs dropped. The central bank’s policy making Federal Open Market Committee described the expansion as “solid,” an improvement over the “moderate” performance it saw in December. It also substituted “strong” for “solid” in its evaluation of job gains.
The one blemish Thursday was an unexpected drop in pending home sales. Contracts to purchase previously owned houses fell 3.7 percent in December, the most in a year, according to figures from the National Association of Realtors.
The median forecast of 42 economists surveyed by Bloomberg called a 0.5 percent increase.
“Total inventory fell in December for the first time in 16 months, resulting in fewer choices for buyers and a modest uptick in price growth,” Lawrence Yun, the NAR’s chief economist, said in a statement. “More jobs, increasing consumer confidence, less expensive mortgage insurance and new low down-payment programs coming into the marketplace will likely lead to more demand from first-time buyers.”
Figures on jobless claims often see-saw around this time of year as the holidays make it difficult to adjust the data for seasonal variations. For example, last week the Martin Luther King Jr. holiday shortened the workweek, giving government staff less time to crunch the numbers, a Labor Department spokesman said as the data were released to the press.
Nonetheless, the drop brought a resounding halt to an acceleration that had taken claims to a seven-month high in early January, fueling concern firings were on the rise.
The increase earlier this month “might have been a little bit of a head fake,” contributing to jittery financial markets, said Berger.
The median forecast of 51 economists surveyed by Bloomberg called for 300,000 claims. Estimates ranged from 270,000 to 315,000. The Labor Department revised the prior week’s reading to 308,000 from an initially reported 307,000.
The four-week average of claims, a less-volatile measure than the weekly figure, dropped to 298,500 from a six-month high of 306,750 the prior period.
The Bloomberg consumer comfort index climbed to 47.3 from 44.7 the prior week, the biggest advance since March 2010. A gauge of optimism about the economy has almost doubled since the end of September, while a measure of personal finances was the strongest since October 2007.
“By all accounts, it’s been a great start to the new year for consumer sentiment,” Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg, said in an e-mailed statement.
Confidence improved for almost every demographic group last week. Sentiment among those 35 to 44 years old advanced the most. Full-time workers, homeowners, married adults and those in the western U.S. also posted gains.
Among income categories, those making more than $50,000 a year were the most upbeat since August 2007.
The claims data are showing no sign that the energy-price plunge has prompted more firings in the oil patch. In no state did claims increase by more than 1,000 for the week ended Jan. 17, the report showed.
Sustained muted firings typically aid a pickup in job growth. The labor market is coming off its best year since 1999, with employers finishing the year adding 252,000 to staff in December. Almost 3 million jobs were added in 2014 as the jobless rate declined to 5.6 percent, a more than six-year low.
Progress in employment, combined with a sustained drop in fuel prices, is bolstering household balance sheets and keeping U.S. growth humming.
The average cost of a gallon of regular gasoline was $2.04 on Jan. 28, down from $3.68 in late June, according to data from motoring group AAA.
A report Friday from the Commerce Department is projected to show the economy grew at a 3.1 percent annualized rate in the fourth quarter after expanding at a 5 percent pace in the previous three months that was the strongest in more than a decade. The average growth rate since the expansion began in June 2009 has been 2.3 percent.
Consumer spending is projected to have grown at a 4 percent pace in the last three months of 2014, the most in four years.
(An earlier version of this story corrected the last paragraph to say the gain in consumer spending would be the largest in four years instead of one year.)