Jobless Claims Drop as Confidence in U.S. Picks Up: Economy
Fewer Americans are filing applications for unemployment benefits, consumer confidence is rising and manufacturing is picking up as the world’s largest economy shows additional signs of strengthening.
Jobless claims fell by 6,000 to 312,000 in the week ended June 14, the Labor Department reported today in Washington. Households this month were the most optimistic about the economic outlook in a year, factories in the Philadelphia region expanded at a faster pace and the index of leading indicators rose in May for the fourth straight month, other reports showed.
“The economy will look healthier in the second half of the year,” said Michelle Meyer, senior U.S. economist at Bank of America Corp. in New York. “It’s a combination of factors moving in the right direction reinforcing one another: manufacturing building momentum, the labor market continuing (INJCSP) to improve and support consumer spending and business investment turning higher.”
The pickup supports Federal Reserve forecasts that the economic expansion will gather steam after a first-quarter slump, keeping policy makers on track to continue trimming stimulus this year. At the same time, still-elevated unemployment and restrained wage growth mean that central bankers can maintain monetary stimulus.
The Standard & Poor’s 500 Index extended a record and global equities rallied as the Fed’s policy statement fueled optimism that the economic recovery will accelerate. The S&P 500 rose 0.1 percent to 1,959.48 at the close in New York.
Today’s report from the Labor Department showed the number of workers receiving jobless benefits decreased to the lowest level in almost seven years. Continuing claims dropped by 54,000 to 2.56 million in the week ended June 7, the fewest since October 2007. The unemployment rate among people eligible for benefits declined to 1.9 percent from 2 percent the prior week.
“The job market continues to improve,” said Ryan Sweet, senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who correctly projected the number of applications and is the top claims forecaster over the past two years, according to data compiled by Bloomberg. “It suggests we’re going to have another decent gain in” job creation this month.
Fewer firings typically signal acceleration in job growth. Employers added 217,000 workers to payrolls in May, lifting the average monthly advance so far this year to 213,600, the most since 1999.
Some retailers are adding stores and hiring amid strong sales. Houston-based Men’s Wearhouse Inc. (MW), opened nine stores in the first three months of the year and is adding workers at its New Bedford, Massachusetts, factory to keep up with demand for custom suits.
“We’ve hired additional personnel in our factory to increase the production to keep up with our anticipated needs,” Chief Executive Officer Doug Ewert said on a June 6 earnings call. “Based on the higher-than-expected demand, it’s going to take longer than we anticipated to produce sufficient inventory to get all of our stores in business. While unanticipated, this is a nice problem to have.”
The drop in claims last week was in line with the median forecast of 50 economists surveyed by Bloomberg, which called for 313,000. Estimates ranged from 295,000 to 321,000.
The improving job market is helping underpin confidence. The monthly Bloomberg expectations gauge rose to 48.5, the highest since June 2013, from 42.5 the month prior, data today showed. The weekly Bloomberg Consumer Comfort Index (COMFCOMF) for the period ended June 15 advanced to 37.1, approaching the strongest level of the year.
Sentiment among women reached its highest since November 2007, and workers earning more than $100,000 were the most optimistic in two months.
A pickup in hiring, and the wages that go with it, will be needed to help households cope with the biggest increase in consumer prices in more than a year.
“Sustained improvement in the labor market and modest wage gains appear to be offsetting rising food and gasoline costs,” said Joseph Brusuelas, senior economist at Bloomberg LP. The employment increases are giving Americans “a sunnier disposition,” he said.
Against the backdrop of a strengthening economy, consumer prices rose 0.4 percent in May from the prior month, the biggest increase since February 2013, the Labor Department reported this week. The cost of food jumped 0.5 percent, the most since August 2011.
Manufacturing is among industries showing a revival in growth. The Philadelphia Federal Reserve Bank’s factory index unexpectedly climbed to 17.8 this month, the highest since September, figures showed today. Readings greater than zero signal growth for the region covering eastern Pennsylvania, southern New Jersey and Delaware.
Also today, the Conference Board, a New York-based research group, said its index of leading economic indicators increased 0.5 percent after a 0.3 percent gain in April. The gauge is a measure of the outlook for the next three to six months.
“The economy is in the process of rebounding from a dismal first quarter,” said Robert Dye, chief economist at Comerica Inc. in Dallas, who correctly projected the rise in the index. We’ll “see a moderate-growth economy for the remainder of this year that will allow the Fed to continue to unwind extraordinary policy.”
Fed policy makers yesterday trimmed monthly bond purchases by $10 billion for a fifth straight meeting, to $35 billion, keeping them on pace to end the program late this year. The policy-making Federal Open Market Committee repeated it expects the benchmark interest rate to stay low for a “considerable time” after the bond buying ends.
The U.S. economy shrank at a 1 percent annualized rate in the first quarter, the worst performance in three years, figures from the Commerce Department show. It’s projected to grow at a 3.5 percent pace this quarter and expand 3.1 percent on average over the last six months of the year, according to the median forecast of economists surveyed by Bloomberg.
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