Jobless claims point to labor recovery momentum
By Jason Lange | December 14, 2012 2:35 AM EST
New jobless claims fell sharply last week to a near four-year low and retail sales rebounded in November, hopeful signs for an economy that appears to have slowed sharply in the fourth quarter.
New claims fell for a fourth straight week, dropping 29,000 to a seasonally adjusted 343,000, the Labor Department said on Thursday.
That left claims at their lowest since early October, and within a hair of their February 2008 level during the early days of the 2007-09 recession.
"The labor market might be improving a bit quicker than expected," said David Sloan, an economist at 4Cast in New York.?
The report suggests the labor market has moved past superstorm Sandy, which hit the East Coast in late October and led to a temporary spike in claims.
The four-week moving average for new claims, seen as a better measure of labor market trends, dropped 27,000 to 381,500.
A slow but steady improvement in the labor market has helped support retail sales, which propped up economic growth in the third quarter when business investment sagged.
Economic growth is expected to slow in the fourth quarter, beset by slower inventory building and worries among companies that the U.S. government will adopt harsh austerity measures in January.
U.S. stock prices were little changed after the claims and retail data.
In November, retail sales rose 0.3 percent, rebounding from a 0.3 percent decline in October, the Commerce Department said in a separate report. Economists polled by Reuters had expected an increase of 0.5 percent last month.
A separate measure of retail sales, which strips out automobiles, gasoline and building materials, rose a more healthy 0.5 percent. This core reading more closely follows the government's gauge of consumer spending, which is a major component of economic growth.
"Consumers have recovered somewhat," said Joseph Trevisani, a market strategist at Worldwide Markets in Woodcliff Lake, New Jersey.
Many economists think fears of imminent tax hikes and government spending cuts are hitting consumer confidence and leading businesses to hold back on investment. In early December, the Thomson Reuters/University of Michigan's consumer sentiment index plunged by the most since March 2011.
Economic growth is expected to slow to a 1.2 percent annual rate in the last three months of the year, a Reuters poll showed on Wednesday, down from a 2.7 percent rate in the third quarter.
The Commerce Department said in a third report that business inventories, which are a key component of economic growth, rose 0.4 percent in October, in line with expectations.
The rise in overall retail sales was tempered by a 4 percent decline in receipts at gasoline stations, the biggest drop since December 2008. That likely reflects a fall in gasoline prices during the month, which left consumers with more money to spend on other things.
The Labor Department said separately that U.S. wholesale prices dropped 0.8 percent in November as gasoline prices plunged 10.1 percent, their sharpest drop since March 2009.
The price report, which showed little inflation pressure building in the U.S. economy, gives the U.S. Federal Reserve room to continue with stimulus programs aimed at bringing down the unemployment rate.
So-called core wholesale prices, which strip out volatile energy and food costs, rose a modest 0.1 percent last month.
The Fed announced a new round of monetary stimulus on Wednesday, taking the unprecedented step of indicating interest rates would remain near zero until unemployment falls to at least 6.5 percent.
(Reporting by Jason Lange; Additional reporting by Chris Reese and Nick Olivari in New York; Editing by Neil Stempleman)
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