Jobless Claims Drop Affirms Labor Market Progress: EconomyShobhana Chandra and Lorraine Woellert
Applications for unemployment benefits in the U.S. fell more than forecast last week, easing concern the labor market was taking a turn for the worse.
Jobless claims plunged by 42,000 to 346,000 in the week ended April 6 from a revised 388,000, Labor Department figures showed today in Washington. Consumer confidence was little changed last week as gains for top earners helped overcome growing pessimism at the other end of the income scale, another report showed.
The decline in claims puts them almost back to where they were before Easter and spring break at schools caused a surge over the past two weeks as the government had difficulty adjusting the data for holidays which occur at different times each year. Fewer firings indicate employers are retaining workers to meet sales, laying the groundwork for a pickup in hiring after payroll gains slowed in March.
“It’s heartening that these numbers have come down,” said Nariman Behravesh, chief economist at IHS Inc. in Lexington, Massachusetts, who forecast a decrease to 345,000, the closest among economists surveyed. “The weakness may have been overstated. This is an early piece of evidence that we’ll see a bounce back in the April employment numbers.”
Stocks rose as the drop in claims and gains by retailers extended a rally in the Standard & Poor’s 500 Index to a fourth day. The S&P 500 climbed 0.4 percent to 1,593.37 in New York, reaching a new record.
The gain in equities may be boosting sentiment among the better off. Confidence among American households earning more than $100,000 climbed last week to the highest level in more than two years just as the Standard & Poor’s 500 Index set a record, the Bloomberg Consumer Comfort Index showed today.
The gauge for the top earners rose to 12.6, its highest since October 2010. The seven-point jump from the previous week was the biggest since the end of September.
News on the jobs front wasn’t as positive elsewhere. Australia’s unemployment rate climbed in March to the highest level in more than three years, sending the local dollar and bond yields lower as traders added to bets the central bank will resume interest rate cuts.
Federal Reserve Chairman Ben S. Bernanke and his colleagues reiterated March 20 they will press on with monetary easing until the labor market outlook improves “substantially.”
Minutes of the March meeting, released yesterday, showed members of the policy making committee “thought that if the outlook for labor market conditions improved as anticipated, it would probably be appropriate to slow purchases later in the year and to stop them by year-end.”
The median forecast of 49 economists surveyed by Bloomberg projected jobless claims in the U.S. would drop to 360,000. Estimates ranged from 335,000 to 380,000. The Labor Department revised the previous week’s figure from 385,000 to 388,000, the highest since November, when workers in the Northeast were thrown out of work in the aftermath of superstorm Sandy.
Since reaching a five-year low of 334,000 a month ago, claims shot up as the temporary dismissals of school bus drivers and cafeteria workers that typically take place during spring break occurred earlier than the government projected this year. The hiring and firing among retailers in the weeks leading up to and following Easter are also difficult to predict, adding to the volatility.
“Wide weekly swings in claims are fairly commonplace, especially at this point in the year,” Tom Simons, a money-market economist at Jefferies LLC in New York, said in a note. “We continue to view the labor market as on the path of recovery and the data will continue to improve in fits and starts.” Simons said claims will settle in the 350,000 to 355,000 range when all the seasonal issues are resolved.
The prior surge in claims combined with the smaller-than-projected employment increase last month had fueled concern that sequestration, the automatic federal government spending cuts that began taking effect on March 1, was beginning to weaken the job market.
Payrolls grew in March by 88,000, the smallest gain in nine months, after a revised 268,000 February increase, the Labor Department reported on April 5. The unemployment rate fell to 7.6 percent, the lowest in four years, from 7.7 percent.
Franklin Covey Co., a Salt Lake City-based consulting and educational services company, is among those looking to expand. It added 10 salespeople during the quarter ended March 2, and expects to meet its goal of expanding its sales staff by 30 for the year.
“We’ve accelerated our marketing and hiring investments,” Chief Executive Officer Robert Whitman said on an earnings conference call on April 4.
The Bloomberg Consumer Comfort Index today showed the gains in confidence weren’t universal. The advance among the highest paid contrasted with declines for households earning less than $15,000, who were the most pessimistic last week in three months. Their gauge dropped 10.8 points to minus 60.3, the lowest reading since Jan. 13. Confidence among the unemployed fell to its lowest level in five months.
The crosscurrents left the measure of total confidence little changed last week at minus 34 compared to minus 34.1 in the previous seven days. The Bloomberg Consumer Comfort Index has held within a 0.5-point range for the past month.
The economy expanded at a 3 percent annualized rate in the first three months of 2013 and will slow to a 1.5 percent pace in the second quarter, according to the median forecast of economists surveyed by Bloomberg from April 5 to April 9.
Cooling growth will in part reflect the $85 billion in across-the-board government budget cuts that started last month. The reductions in planned spending, which began because Congress couldn’t compromise on a debt-reduction strategy, trim 5 percent from domestic agencies and 8 percent for the Defense Department this fiscal year.
Some employers are paring staff. Even after the banking industry posted its best results since 2006, the six largest U.S. banks announced plans in the first three months of this year to eliminate about 21,000 positions, or 1.8 percent of their combined workforce, according to data compiled by Bloomberg. That’s the most since 2011’s third quarter. JPMorgan Chase & Co. topped the list with 17,000 reductions scheduled by the end of 2014.