Saturday, August 17, 2013

Jobless Claims in U.S. Decline to Lowest Level Since 2007

Employers fired the fewest workers last week since before the recession began almost six years ago, raising expectations that bigger job gains will soon give U.S. consumers the ability to boost spending.


The number of claims for jobless benefits dropped by 15,000 to 320,000 in the week ended Aug. 10, the least since October 2007, according to Labor Department data today in Washington.

Other figures showed consumer confidence hovered near a five-year high last week, builder sentiment jumped this month to the highest level since 2005 and manufacturing is struggling to gain traction following a slowdown earlier this year.

Stocks and government securities tumbled as signs of an improving economy and stabilization in inflation fueled speculation the Federal Reserve will curb bond purchases this year.

A slowdown in firings may be a precursor to a pickup in hiring that would bolster household incomes and the spending that accounts for 70 percent of the economy.

“We’re probably at the point where we’re likely to see some acceleration in the pace of hiring, and that’s likely to reflect what we think is going to be a fairly decent growth performance in the second half of this year,” said Millan Mulraine, director of U.S. rates research at TD Securities USA LLC in New York, who projected claims would drop to 325,000.

The Standard & Poor’s 500 Index dropped 1.4 percent, the most since June, to 1,661.32 at the close in New York. The yield on the benchmark 10-year Treasury note, which moves inversely to prices, climbed to 2.76 percent from 2.71 percent late yesterday.

Survey Results

The median forecast of 44 economists surveyed by Bloomberg projected the number of jobless claims would rise to 335,000. Last week’s reading was lower than any economist in the Bloomberg survey projected, with estimates ranging from 322,000 to 347,000.

The Labor Department revised the previous week’s figure to 335,000 from an initially reported 333,000. Another Labor Department report today showed the cost of living in the U.S. rose in July for a third month, supporting the Fed’s forecast that inflation will move closer to its target.

The consumer-price index (COMFCOMF) increased 0.2 percent in July after a 0.5 percent gain the prior month. The increase in consumer prices last month was led by rising costs for clothing, medical care, tobacco and new automobiles.

Declines in household furnishings, airline fares and used cars and trucks limited the advance.

Picking Up

Prices increased 2 percent in the 12 months ended in July after a 1.8 percent year-over-year gain the prior month.

The Fed’s preferred inflation gauge, a measure issued by the Commerce Department that tracks consumer spending, showed prices rising 1.3 percent in the year ended June, short of policy makers’ 2 percent goal.

It’s a “pretty subdued pace of inflation, but not getting any weaker,” said Julia Coronado, chief economist for North America at BNP Paribas in New York (EMPRGBCI) and a former Fed researcher.

That’s “probably a pretty welcome development for the Fed.” Chairman Ben S. Bernanke will probably begin to dial down on $85 billion a month in asset purchases at a meeting of the Federal Open Market Committee Sept. 17-18, according to 65 percent of economists surveyed by Bloomberg Aug. 9-13.

Federal Reserve Bank of St. Louis President James Bullard today said the current low pace of inflation wouldn’t ordinarily prompt the central bank to curtail stimulus.

To the extent that the CPI report shows prices rising, “that would be bolstering the notion that inflation would naturally be moving back toward target in the coming months and quarters,” he told reporters following a speech in Louisville, Kentucky.

Employment Gains

An improving job market may also signal to Fed officials that the economy needs less stimulus. Payrolls expanded by 162,000 workers in July, compared to 188,000 the prior month. The jobless rate dropped to a more than four-year low of 7.4 percent in July from 7.6 percent in June.

Initial jobless claims reflect weekly firings and typically wane before job growth can accelerate. As an improving economy encourages companies to hold on to their employees, job candidates could benefit from a growing number of available positions.

“We’re probably looking for a payroll print above 200,000 and another drop in the jobless rate in the August report,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, who projected claims would drop to 322,000, the closest and lowest estimate in a Bloomberg survey.

“We’ve got decent momentum on consumer spending” heading into the third quarter, he said.

Gaining Confident

The Bloomberg Consumer Comfort Index dropped last week for the first time in a month, another report today showed.

The measure declined to minus 26.6 for the period ended Aug. 11 from minus 23.5 the prior period that was the highest since January 2008. A rebound in housing is among reasons households have been feeling less pessimistic about the economy.

The National Association of Home Builders/Wells Fargo builder confidence index climbed to 59, the highest level since November 2005, the Washington-based group reported today. Readings greater than 50 mean more builders view conditions as good than poor.

A report from the Commerce Department tomorrow is projected to show builders began work on more houses last month as the industry rebounds from June’s almost one-year low.

Gains in housing are boosting advertising at Zillow Inc. (Z), a real-estate services website, prompting the company to expand its marketing staff this year. Zillow’s customers, including real estate agents, also are hiring, Chief Executive Officer Spencer Rascoff said.

Housing Jobs

“They’re looking at ways to grow their business and invest, they’re hiring assistants, transaction coordinators, they’re doing deals,’ Rascoff said on an Aug. 6 earnings call.

“That puts them in growth mode and that makes them more confident to spend media money with us.” Manufacturing is one area of the economy that is having a difficult time sustaining gains.

Factory production dropped 0.1 percent in July, the first decline in three months, according to Fed data also issued today. Total industrial output, which includes mining and utilities, was unchanged.

Two regional Fed reports today also showed manufacturing grew in the New York and Philadelphia (OUTFGAF) districts in August for a third month, albeit at slower paces, signaling factories are resuming their expansion.

The industrial production data ran counter to figures from supply managers earlier this month that showed manufacturing expanded in July at the fastest pace in more than two years, sparked by surges in orders and production.

Rebound Projected

Industrial production growth should start accelerating,” said Douglas Handler, the Lexington, Massachusetts-based chief U.S. economist at IHS Global Insight, which accurately forecast that output would be unchanged.

Consumer spending is looking healthy and we’re seeing broad increases in business investment.” Nissan Motor Co., pushing to make 85 percent of vehicles its sells in the U.S. at North American plants, last month said 800 jobs will be added at a parts facility being built to aid its Mississippi auto-assembly plant.

Nissan broke ground on July 30 for a parts and logistics “park” at its Canton, Mississippi, plant that will employ 400 workers and a further 400 people to be hired by suppliers, the Yokohama, Japan-based carmaker said in a statement.

bloomberg.com

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