Fewer Firings a Sign U.S. to Regain Growth Momentum: EconomyMichelle Jamrisko
Fewer Americans than forecast applied for unemployment insurance payments last week, pointing to an improving labor market that will help the economy regain momentum following the harsh winter.
Jobless claims decreased by 10,000 to 311,000 in the period ended March 22, the fewest since late November, Labor Department data showed today in Washington. Another report showed the economy grew more rapidly in the fourth quarter than previously estimated as consumer spending rose by the most in three years.
A slower pace of firings, a harbinger of bigger job gains, shows companies are confident sales will rebound after heavy snowfall and freezing temperatures kept people away from malls and auto dealers. Retailers such as Macy’s Inc. are among companies waiting for the weather to improve to get a clearer picture of the economy.
“Activity in the second quarter is going to represent something of a rebound from the first quarter,” said Tom Simons, an economist at Jefferies LLC in New York, who projected claims would drop. “We’ve seen enough good numbers recently to say that it is a sign of fundamental improvement.”
Stocks fell for the fourth time in five days, led by banks and technology companies, as investors resumed a rotation out of the bull market’s biggest winners. The Standard & Poor’s 500 Index fell 0.2 percent to 1,849.04 at the close in New York.
The median forecast of 49 economists surveyed by Bloomberg projected there would be 323,000 claims filed last week. Estimates in the Bloomberg survey ranged from 295,000 to 335,000. The prior week’s reading was revised to 321,000 from a previously reported 320,000.
The four-week average of claims, a less-volatile measure than the weekly figure, dropped to 317,750, the lowest since Sept. 28, from 327,250 in the prior week.
“It seems to be genuinely good news for the labor market,” said Guy Berger, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut. “In all likelihood, employment growth in March is going to be stronger than what we’ve seen in the last three months.”
Employment data confirm signs of thawing. Payrolls rose more than projected in February, with employers adding 175,000 workers, the Labor Department reported earlier this month. The economy added 190,000 jobs in March, according to a preliminary median forecast in a Bloomberg survey ahead of an April 4 report from the Labor Department.
A report from the Commerce Department today showed the world’s largest economy was in better shape at the end of last year than previously estimated heading into the dip in temperatures.
Gross domestic product grew at a 2.6 percent annualized rate from October through December, more than the 2.4 percent gain reported last month, figures from the Commerce Department showed today in Washington.
Consumer purchases, which account for almost 70 percent of the economy, advanced at a 3.3 percent pace in the fourth quarter, the most since the last three months of 2010, according to the report. Spending added 2.2 percentage points to growth from October through December, following a 2 percent advance in the prior three-month period.
The latest readings indicate demand is making a comeback after a weather-induced slump. Retail sales rose in February for the first time in three months, the Commerce Department reported earlier this month, reflecting increasing purchases at department stores, sporting goods outlets and online merchants.
Households are also helping boost the economy in the U.K., where retail sales rose in February more than three times as much as economists forecast, figures from the Office for National Statistics in London showed today. Internet sales and spending on food surged, signaling the recovery maintained its momentum in the first quarter.
Economists project it will be next quarter before data in the U.S. confirms a pickup. GDP will expand at a 1.8 percent pace from January through March, before advancing 2.8 percent in next three months, according to the median forecast of economists surveyed by Bloomberg.
Between December and February, snow covered 1.42 million square miles in the contiguous U.S., the tenth-largest seasonal snow cover in records dating to 1966, according to the National Climatic Data Center. More than 90 percent of the Great Lakes were frozen at the beginning of March, the second-largest ice cover in records going back to 1973. Energy demand was 27 percent above average.
In warm-weather markets, business is doing “extremely well,” Macy’s Chief Financial Officer Karen Hoguet said at a March 25 conference. “Other places we’ve had such up-and-down weather that it’s a little bit harder to know what’s weather, what’s the consumer, what’s really happening. I don’t think I would say that the consumer is overwhelmingly excited about spending.”
Some of the lack of excitement recently may be due to rising gasoline prices. Consumer confidence declined last week to the lowest level in almost two months as Americans turned more pessimistic about the economy, another report today showed.
The Bloomberg Consumer Comfort Index fell for a second week, declining to minus 31.5 in the period ended March 23 from minus 29. For the first time since early February, all three components of the gauge, which also includes measures of the buying climate and personal finances, decreased in unison.
Higher prices at the gas pump are probably damping spirits among lower-income households.
“Rising gasoline prices, sluggish wage growth and the lagged impact of a reduction in hours worked have likely exacted a toll on consumer sentiment, especially down the income ladder over the past three months,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.
The bigger gain in consumer spending last quarter was partly offset by a smaller increase in business investment, reflecting diminished gains in inventories and software spending, today’s GDP report showed.
Housing has been one of the areas hardest-hit by the fall in temperatures. Contracts to purchase previously owned homes unexpectedly fell in February for an eighth straight month, figures from the National Association of Realtors showed today. The group’s index of pending home sales decreased 0.8 percent after a 0.2 percent drop the prior month that was previously reported as a gain.
“For housing, it’s been primarily an issue of bad weather,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. “Conditions will improve as the weather improves,” he said.