Stabilizing Confidence Shows U.S. Claims Jump Temporary

Confidence among U.S. consumers stabilized last week, easing concern the latest jump in jobless claims signals a setback in the job market.

The Bloomberg Consumer Comfort Index increased to minus 34.1 in the week ended March 31 from a six-week low of minus 34.4 in the prior period as measures of the state of the economy and buying climate improved. The number of people filing applications for unemployment benefits unexpectedly jumped last week to a four-month high, according to Labor Department data.

The comfort readings from January through March were the strongest on average of any first quarter since 2008 as gains in hiring, record stock prices and a rebound in housing encouraged households. The surge in claims should be discounted because it’s difficult for the government to adjust the data for swings during holidays like Easter that fall on different weeks from year to year, according to Ameriprise Financial Inc.’s Russell Price.

“Confidence will continue to recover,” said Price, a senior economist in Detroit and the top forecaster of payrolls in the last two years, according to data compiled by Bloomberg. “Relatively steady growth in employment and the wealth effect are providing relief to Americans. We’ll be able to maintain a modest pace of consumer spending this quarter.”

A report tomorrow from the Labor Department may show employers added 190,000 workers to payrolls in March following a 236,000 gain the month before, according to the median forecast in a Bloomberg survey. The jobless rate is projected to hold at 7.7 percent, matching February’s four-year low.

BOJ Plans

Elsewhere today, the Bank of Japan announced it plans to purchase 7.5 trillion yen ($78.6 billion) of bonds a month and double the monetary base, which includes cash in circulation, in two years, in a bid to end two decades of economic stagnation and 15 years of deflation.

In the U.K., service industries unexpectedly strengthened in March, easing concern the economy may be heading for a triple-dip recession.

Stocks in the U.S. advanced as central banks in Japan and Europe reassured investors that they will keep economies awash in cash to bolster growth. The S&P 500 rose 0.4 percent to 1,559.98 at the close in New York.

Jobless claims rose by 28,000 to 385,000 in the week ended March 30, the highest since Nov. 24 when superstorm Sandy boosted filings, the Labor Department figures showed. The median forecast of 47 economists surveyed by Bloomberg called for a drop to 353,000.

Seasonal ‘Quirks’

“We have seasonal-adjustment quirks,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, who correctly projected the jump. “Next week, we expect claims to come right back down. The labor market is OK. It’s fine.”

The claims week included Good Friday on March 29 before the Easter holiday, which was earlier than the last four years. Claims for the Virgin Islands and California were estimated, a Labor Department spokesman said as the figures were being released. Economists’ forecasts in the Bloomberg survey ranged from claims of 330,000 to 400,000.

The Bloomberg comfort index’s measure assessing Americans’ views on the current state of the economy climbed to minus 60.6 from minus 61.1 following four straight declines.

The buying-climate index improved to minus 40.7 from minus 41.7 the prior week. Thirty percent said it was a good time to buy things that they want or need, up from 29 percent last week.

By contrast, the gauge of personal finances fell to minus 0.9 last week, its lowest level since early February, from minus 0.5 the prior period.

Unexpected Rebound

An unexpected rebound at the end of March put the Thomson/Reuters University of Michigan’s consumer sentiment index more in line with the Bloomberg comfort gauge. Michigan’s measure jumped to 78.6 last month from a preliminary reading of 71.8, the group reported last week. It was now little changed from February’s 77.6, erasing the previously reported decline.

Confidence is being buffeted by cross currents. Gains in hiring, rising stocks and an improving housing market are undergirding attitudes just as the levy that funds Social Security reverted at the start of the year to its 2010 level of 6.2 percent from 4.2 percent. Workers earning $50,000 take home about $83 less a month.

The Standard & Poor’s 500 Index has gained 8.9 percent this year through yesterday, and closed at a record high of 1,570.25 on April 2.

A housing recovery is also helping restore household net worth. Home prices rose 10.2 percent in the 12 months through February, the biggest increase in seven years, according to data from according to Irvine, California-based CoreLogic Inc.

Housing Rebound

“The housing sector has clearly played an important role in keeping consumer confidence indicators up,” said Louis Crandall, chief economist at Wrightson Icap LLC in Jersey City, New Jersey. “That’s something that’s providing a general basis of support for the economy as a whole.”

Strengthening consumer confidence would signal spending on autos and other big-ticket items will continue to improve, making companies including Ford Motor Co. more optimistic. Cars and light trucks sold at a 15.2 million annualized pace in March, capping the strongest quarter since the first three months of 2008.

“The outlook has improved in terms of the employment growth and income gains,” Jenny Lin, Ford’s senior economist for the Americas, said in an April 2 sales and revenue call. “The buying appetite for houses and consumer durables remain actually very favorable.”

Gaining Confidence

Among households earning $50,000 to $75,000 a year, the Bloomberg comfort index rose to minus 10.6, its highest level since December 2007, from minus 23.2, according to today’s report.

Conversely, sentiment among those earning less than $15,000 dropped 7.8 points to its lowest level in almost two months. Confidence for this group had climbed 35 points from January through mid March.

Confidence improved in three of four regions of the country last week, falling only in the West.

Men were at their most optimistic in almost a year, and women were at their most pessimistic since mid-January. Confidence among adults between 55 and 64 years old retreated to its lowest since early October.