Jobless Claims Unexpectedly Fall as Labor Market ImprovesMichelle Jamrisko and Jeanna Smialek
A strengthening job market is helping lift Americans’ spirits, raising the odds the economy will pick up this year as consumers sustain a surprise spending streak.
The number of people filing claims for jobless benefits averaged 346,750 over the past four weeks, the lowest level since March 2008, according to data today from the Labor Department in Washington. The Bloomberg Consumer Comfort Index advanced to minus 31.6 in the week ended March 10, the highest since April, another report showed.
“This is better than we could have expected,” said Lou Crandall, chief economist at Wrightson Icap LLC in Jersey City, New Jersey, and the second-best forecaster of jobless claims for the past two years, according to data compiled by Bloomberg. “We’re slowing the pace of layoffs, which is a good first step. Things appear to be improving.”
A pickup in employment, record-high stock prices and a rebounding housing market are helping households repair tattered finances, leading to gains in purchases at retailers including Lowe’s Cos. Economists surveyed by Bloomberg this month raised forecasts for first-quarter growth, showing the world’s largest economy is gaining enough momentum to cope with the immediate damage from federal budget cuts.
“Maybe we’ll see some softening in coming months, but the trend remains encouraging” in the job market, said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Florida. “Sequestration is still hanging over things.”
The Labor Department’s report also showed first-time jobless claims unexpectedly fell by 10,000 to 332,000 in the week ended March 9, the fewest since mid-January. The median forecast of 49 economists surveyed by Bloomberg called for an increase to 350,000.
Stocks climbed on the drop in firings, sending the Standard & Poor’s 500 Index closer to a record. The S&P 500 rose 0.6 percent to 1,563.23 at the close in New York, putting it about two points away from its all-time high of 1,565.15 set in October 2007.
Economists’ claims estimates in the Bloomberg survey ranged from 330,000 to 365,000. The Labor Department revised the number of applications for the prior week to 342,000 from an initially reported 340,000.
The Bloomberg Consumer Comfort Index has increased for six consecutive weeks, gaining almost six points over the period.
The gauge’s measure of personal finances climbed last week to the highest reading since July. The share of Americans with a positive view of their finances rose to 51 percent, also an eight-month high.
The buying-climate index also improved as 31 percent said it was a good time to buy things that they want or need, the most this year.
Attitudes are getting a boost from better job prospects. Unemployment fell to 7.7 percent in February, the lowest in four years, from 7.9 percent in January, and the economy added 236,000 jobs, the Labor Department said last week.
Stocks have extended their gains as well. The Dow Jones Industrial Average climbed for a 10th straight day, the longest winning streak since 1996. The gauge has set record closing highs for eight straight days.
The economy will grow at a 2 percent annualized rate in the first quarter, up from a previous estimate of 1.8 percent, according to the median forecast of economists surveyed by Bloomberg from March 8 to March 13.
A housing market rebound may also be helping sentiment and making Americans more confident about their finances. Household wealth climbed by $1.17 trillion in the fourth quarter to the highest level in five years, propelled by a gain in home prices, data from the Federal Reserve showed last week.
“Consumers feel much better when it comes to discretionary spending, about spending on their home if they believe the value is going up,” Robert Niblock, chairman and chief executive officer at Lowe’s, the second-largest U.S. home-improvement retailer, said at a conference yesterday. “We’re seeing more of that in some of the smaller tickets. We’re also seeing growth in larger tickets as well.”
The gains in sentiment are translating into more spending. Retail sales climbed 1.1 percent in February, the most in five months, after a 0.2 percent gain in January, Commerce Department figures showed yesterday.
Higher stocks and home values are providing a cushion against increased payroll taxes and more expensive gasoline. The levy that funds Social Security reverted as of January to its 2010 level of 6.2 percent from 4.2 percent. Workers earning $50,000 take home about $83 less a month.
The price of a gallon of regular gasoline is holding around $3.70 after reaching a recent low of $3.22 on Dec. 19, according to figures from AAA, the largest U.S. motoring group.
Automatic across-the-board federal budget cuts that started taking effect on March 1 may cause some government agencies and companies to pull back in coming months. The reductions, known as sequestration, sum to about $85 billion in spending authority for the fiscal year that ends in September.
“The sequester is another issue,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the claims report. “Beginning in April, we’ll start to get layoff notices, so we could see some upward bias on new filings because of the sequester, but lawmakers still have time to scale it back.”
“I think we’re setting up for some softening,” Sweet said.
Some managers may keep staff lean amid concern growth in the U.S. and globally will cool. Agilent Technologies Inc. of Santa Clara, California, a scientific-testing equipment company, is trimming costs.
“Fiscal year 2013 will be our second year of weak revenue growth and the second year of clamp-down on our expenses, and that includes hiring, very strict hiring controls,” Chief Financial Officer Didier Hirsch said at a March 7 analyst meeting. “Last month, we implemented even deeper cuts and we implemented those deeper cuts as a hedge because of the uncertainty about the world economy.”
Another Labor Department report showed wholesale prices climbed in February by the most in five months, reflecting a jump in energy costs that are now dissipating.
The 0.7 percent increase in the producer price index matched the median estimate in a Bloomberg survey of economists and followed a 0.2 percent rise the prior month. Excluding volatile food and energy, the so-called core measure advanced 0.2 percent for a second month.