Bloomberg News

U.S. Jobless Claims Fall, Consumer Comfort Climbs: Economy

January 03, 2012

(Updates with sentiment by political affiliation in 13th paragraph.)

Dec. 22 (Bloomberg) -- Fewer Americans than forecast sought jobless benefits and consumer confidence climbed, giving the world’s largest economy a boost heading into 2012.

Unemployment claims fell by 4,000 to 364,000 in the week ended Dec. 17, the lowest level since April 2008, Labor Department figures showed today in Washington. The Bloomberg Consumer Comfort Index improved to minus 45 in the period ended Dec. 18 from a reading of minus 49.9 the prior week, marking the biggest seven-day gain since January.

A decline in firings and the cheapest gasoline prices since February are helping revive retail sales during the busiest shopping season of the year. A stronger consumer, whose spending accounts for 70 percent of the economy, raises the odds the U.S. can ride out the debt crisis in Europe or failure by Congress to extend tax cuts.

“Spending has looked pretty good so far, and continued job and income growth will help maintain that,” said Samuel Coffin, an economist at UBS Securities LLC in New York, who projected claims would fall to 365,000. “At some point, events in Europe are likely to have some effect on activity, but we’re heading into that headwind with a lot of momentum.”

Stocks rose on the improving jobs outlook, sending the Standard & Poor’s 500 Index higher for a third day. The gauge increased 0.8 percent to 1,254 at the close in New York. Treasury securities also advanced, sending the yield on the benchmark 10-year note down to 1.96 percent from 1.97 late yesterday.

Survey Results

The median forecast of 45 economists surveyed by Bloomberg News projected an increase in jobless claims to 380,000. Estimates ranged from 355,000 to 400,000. The number of applications has dropped by 40,000 over the past three weeks.

“This is great news,” Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York, said in a note to clients. “One unexpectedly low number can easily be a fluke. Two are interesting. Three are telling us something real is happening in the labor market.”

The decrease in claims is consistent with payroll gains of about 200,000 a month, Shepherdson said.

The number of people continuing to receive jobless benefits fell by 79,000 in the week ended Dec. 10 to 3.55 million, the lowest since September 2008.

In data out of Europe, economic growth in the U.K. accelerated more than previously estimated in the third quarter in a surge that the Bank of England says is unlikely to be repeated as Europe’s debt crisis curbs bank lending and dents confidence. Gross domestic product rose 0.6 percent from the previous quarter, faster than the 0.5 percent reported last month, the Office for National Statistics said today in London.

Confidence Boost

The drop in firings in the U.S. may be helping boost confidence. The Bloomberg comfort index rose last week to the highest level in five months as all three components -- state of the economy, buying climate and personal finances -- improved.

A monthly expectations gauge climbed to minus 17 for December, a seven-month high.

Sentiment among Democrats advanced 12.1 points to minus 39.2, the highest since mid-June, while sentiment among Republicans rose 2.1 points to minus 43.1.

The improvement in President Barack Obama’s approval rating to 49 percent in an ABC News/Washington Post poll this week may be behind the increase in optimism, Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement.

“A slower pace of firing and stabilization in the broader labor market are the likely sources for bolstered consumer sentiment,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “While challenges remain, it’s a solid note to close what has been an otherwise discordant 2011.”

The figures are consistent with other findings. The Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 69.9 in December, a six-month high, from 64.1 at the end of November, the group said today.

Cheaper Gasoline

Lower fuel costs are probably also helping lift confidence. The price of regular unleaded gasoline at the pump decreased to $3.21 a gallon Dec. 20, its lowest since February, according to AAA, the biggest U.S. auto group.

Pier 1 Imports Inc. is among retailers seeing a pickup in sales at the start of the holiday shopping season without resorting to bigger price cuts.

“Sales are robust, merchandise margins are strong, operating margins are growing,” Alexander Smith, president and chief executive officer at Pier 1, said on a Dec. 15 conference call. Sales during the Thanksgiving weekend “increased 10 percent from last year and were achieved with modest levels of discount.”

FedEx Corp. posted quarterly profit that beat analysts’ estimates, helped by stronger demand for home delivery.

More Shipments

“Consumer confidence remains at very low levels, but we have seen improvement recently,” Mike Glenn, executive vice president for market development at Memphis, Tennessee-based FedEx, said on a Dec. 15 earnings call. For 2012, “we expect U.S. GDP to grow 2.2 percent.”

The economy grew less than previously estimated in the third quarter, reflecting a smaller gain in consumer spending, revised figures from the Commerce Department showed today. Gross domestic product climbed at a 1.8 percent annual rate from July through September, down from the 2 percent estimated last month.

The index of leading economic indicators signals the economy will strengthen.

The New York-based Conference Board’s gauge of the outlook for the next three to six months rose 0.5 percent after a 0.9 percent October increase, the research group said today.

Cuts in government spending and failure by Congress to extend tax reductions represent clouds on the horizon. The U.S. House of Representatives rejected this week carrying over into 2012 an expiring 2 percentage-point payroll tax cut and benefits for the long-term unemployed. Should those measures not be prolonged, GDP growth next year will be cut by about 0.6 percentage point, economists at IHS Global Insight estimate.

--With assistance from Chris Middleton in Washington. Editors: Carlos Torres, Vince Golle

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To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net; Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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