In the short run, a hit to Americans’ wallets is trumping the benefits of an improving job market.
The Bloomberg Consumer Comfort Index declined in the seven days ended May 31, marking a record-setting eighth straight weekly drop, a report showed Thursday. At the same time, fewer workers are receiving unemployment benefits than at any time in more than 14 years, according to the Labor Department.
After reaching an eight-year high in early April, confidence has waned as the rebound in gasoline prices from an almost six-year low took some of the joy out of trips to service stations. Greater job security as firings abate and signs that employment is regaining momentum will probably ensure households won’t remain in a funk for long.
“As we look at some of the week-to-week and month-to-month swings, it seems to come down to gas prices” now restraining confidence, said Michael Feroli, chief U.S. economist at JPMorgan Securities LLC in New York. “The broad improvement you’ve seen -- the trend improvement -- is probably more owing to what you see in the labor market.”
Stocks declined, with the Standard & Poor’s 500 Index reaching a four-week low, as a slide in oil and metals weighed on commodities producers and Greece asked for a deferral on its debt payments. The S&P 500 fell 0.9 percent to 2,095.84 at the close in New York.
The comfort gauge decreased to 40.5 last week from 40.9 in the prior period, Thursday’s report showed. It was the first time since the survey began in 1985 that it suffered setbacks for eight weeks in a row.
“In short: It’s a serious sell-off,” Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg, said in a statement. “Weakened views of the buying climate bear the brunt of the blame for the index’s recent troubles.”
The survey’s gauge measuring whether now is a good time to purchase goods and services fell to the lowest level since mid-November. The index of personal finances decreased to a three-month low.
The measure of Americans’ views on the current state of the economy climbed for the first time in eight weeks.
While cheap fuel helped boost sentiment earlier this year, confidence eroded over the past two months in lockstep with the pickup in fuel costs.
The average price of a gallon of regular gasoline was $2.76 as of June 3, the highest since Dec. 1, according to U.S. motoring group AAA. That compares with a more than five-year low of $2.03 seen in January.
“Maybe the consumer mood got a little ahead of itself earlier in the year when we had strong employment gains and gasoline prices were falling,” said Chris Christopher, an economist at IHS Global Insight in Lexington, Massachusetts. “Once pump prices started rising, reality set in.”
The job-market reality remains upbeat. The number of jobless claims decreased by 8,000 to 276,000 in the week ended May 30 from a revised 284,000 in the prior period, the Labor Department report showed.
Firings that have remained subdued mean employers could consider adding to staff as the economy emerges from a first-quarter slump. Job figures released Friday from the Labor Department are set to show steady gains in hiring that should allow Federal Reserve officials to maintain confidence that labor-market progress is on track.
“This suggests businesses really did look through the weakness in the first quarter,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, whose projection for 275,000 claims was among the closest in the Bloomberg survey. “The job market continues to do reasonably well.”
It was the 13th consecutive week that the number of applications held under 300,000, which economists say is consistent with an improving labor market.
The total number of people receiving jobless benefits declined by 30,000 to 2.2 million in the week ended May 23, the fewest since November 2000. The unemployment rate among people eligible for benefits fell to 1.6 percent, matching the lowest since records began in 1971, from 1.7 percent. These data are reported with a one-week lag.
While the persistently low levels of firings are typically associated with a healthy pace of hiring, job gains slowed at the end of the first quarter as the economy sank. Payrolls started to show renewed vigor at the start of this quarter.
Employers added 223,000 jobs in April after an 85,000 gain the prior month that was the lowest since June 2012. Increases have averaged 193,750 so far this year after a 259,670 tally in 2014 that was the best performance in 15 years.
Payrolls probably advanced by another 226,000 in May, according to the median in a Bloomberg survey of economists ahead of Friday’s report.
The improving job market is one reason consumer spending looks poised to pick up. Automobile purchases are among economic data that have been more upbeat since a string of disappointing figures pushed the Bloomberg Economic Surprise Index to its lowest level of the expansion at the start of May.
Sales of cars and light trucks reached 17.71 million in May at an annualized rate, the strongest level since 2005. Steady labor-market healing has kept automakers such as Ford Motor Co. optimistic about the outlook even as other data have been less consistent.
“In May, we continue to see mixed economic data,” Yong Yang, senior economist at Dearborn, Michigan-based Ford, said on a June 2 revenue call. “Nonetheless, labor market improvement remains robust. Overall, we believe that the underlying fundamentals supporting growth in 2015 remain in place.”
Fed policy makers are monitoring employment data as they consider when to raise the benchmark interest rate for the first time since 2006. While improvement has been sluggish in this expansion, Fed Chair Janet Yellen said she sees the labor market returning to health and helping to convince the officials to adjust policy accordingly.
“It is only now, six years after the recession ended, that the labor market is approaching its full strength,” Yellen said in a May 22 speech in Providence, Rhode Island. “If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy.”
The Washington-based International Monetary Fund stepped into the debate Thursday, calling on the Fed to delay any rate increase until the first half of 2016.