U.S. Outlook Optimism at Eight-Year High: Economy
The number of Americans saying the U.S. economy is getting better rose in March to the highest level since 2004 as a decline in claims for unemployment benefits offered more evidence of a labor-market recovery.
Thirty-four percent of respondents to Bloomberg’s monthly consumer expectations survey said the economy was improving, the largest share since January 2004. The pickup boosted the monthly expectations index to the highest in a year. Figures from the Labor Department today showed jobless claims decreased by 5,000 to 348,000 in the week ended March 17, the fewest since February 2008.
The best six months of job growth since 2006 are boosting the optimism of consumers whose spending accounts for 70 percent of the economy. Another report today showed the index of leading indicators rose in February by the most in 11 months, signaling the U.S. expansion will strengthen, helping to sustain global growth as China slows and Europe threatens to sink into a recession.
“The economy will be gradually building up momentum going forward,” said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Connecticut. “We will be shouldering a little bit more of the burden given the slowdown in Europe and some degree of slowing in emerging markets.”
Stocks fell as manufacturing contracted in Europe and China. The Standard & Poor’s 500 Index (SPX) declined 0.7 percent to 1,392.78 at the close in New York. The yield on the 10-year Treasury note dropped to 2.28 percent from 2.3 percent late yesterday.
Bloomberg’s monthly expectations gauge climbed to 1 this month from a reading of minus 7 in February. It was at minus 45 as recently as October. The monthly index is based on responses to people who are asked whether the economy is getting better, worse or staying the same.
Americans are growing more optimistic as employment prospects brighten. Mark Eister, 47, of Kennesaw, Georgia, landed a job this month with Georgia Perimeter College as director of military outreach after sending out more than 400 applications since August. He retired from the U.S. Army in December.
“One week, the phone was ringing off the hook with job offers and interviews,” he said. “I feel like the economy is getting better. As I have talked to more employers and hiring managers, they seem ready to talk and bring people on board.”
The weekly Bloomberg Comfort Index (COMFCOMF), based on a separate survey that asks for current views of the economy, personal finances and whether it’s a good time to buy, 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.
Confidence among the unemployed rose to minus 44 last week, the strongest since April 2008. Sentiment also climbed among those with a college degree, rising to the highest level since March 2008.
Higher gasoline prices may be limiting gains in the index. The average price of regular gasoline at the pump climbed to a 10-month high of $3.88 a gallon yesterday, according to AAA, the nation’s largest auto club. It’s climbed 60 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.”
Dismissals have been waning, and reports show companies are becoming more willing to expand workforces amid evidence sales are improving. Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates.
Good for Spending
The decline in claims “is consistent with gradual improvement in labor-market conditions,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, who correctly projected the level reported today. “It’s good for consumer spending.”
Last week included the 12th of the month, which coincides with the period the Labor Department surveys employers to calculate monthly payroll growth. The March employment report will be released on April 6. Payrolls climbed by 227,000 in February, more than forecast by economists, and the jobless rate held at a three-year low of 8.3 percent.
Companies expanding their workforce include General Electric Co. (GE) The Fairfield, Connecticut-based company this week said it will add 600 jobs at a new Louisville, Kentucky, appliance plant producing refrigerators with freezers built into the bottom.
Strengthening demand may also drive production gains at factories, helping to sustain the expansion and allowing the U.S. to withstand higher oil costs.
Another report today from the New York-based Conference Board showed that its gauge of the outlook for the next three to six months increased 0.7 percent after a revised 0.2 percent gain in January. The median forecast of economists surveyed by Bloomberg called for a 0.6 percent rise.
Eight of the 10 indicators in the leading index contributed to the increase, led by fewer claims for unemployment benefits and a surge in stock prices. The S&P 500 Index is up more than 10 percent this year.
Growth in the U.S. may help make up for weakness in Europe and Asia. Euro-area services and manufacturing output contracted more than economists forecast in March, adding to signs the economy has slipped into recession. A euro-area composite index based on a survey of purchasing managers in both industries dropped to 48.7 in March from 49.3 a month earlier, London-based Markit Economics said in an initial estimate today. Economists forecast a gain to 49.6, according to the median of 21 estimates in a Bloomberg survey. A reading below 50 indicates contraction.
A Chinese manufacturing index indicated a worse contraction this month, bolstering the case for Premier Wen Jiabao to add measures to sustain growth even as he prolongs a campaign to cool property prices.
The preliminary 48.1 reading in a purchasing managers’ index from HSBC Holdings Plc and Markit Economics today is the lowest since November and compares with a final 49.6 in February. A result below 50 indicates a contraction.
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