Is the dark cloud of joblessness finally starting to dissipate?
Key indicators suggest it is, and while this will be a slow-moving dissipation, top economists as well as the U.S. Federal Reserve now say the picture for the coming months looks a little less bleak.
Unemployment, considered to be one of the darkest spots of a recovery that has seen vast improvements in stock markets and marginal gains in housing and auto sales, is finally starting show signs of stabilization and in turn, has consumers loosening their iron grip on their wallets.
“Taken as a whole, the labor market data for the United States is suggesting we are in a gradual, steady improvement towards job growth at some point over the next three to six months and the decline in jobless claims is consistent with that,” said Zach Pandl, an economist at Nomura Global Economics (NYSE ADR: NMR) told The Wall Street Journal. “The trend has been very persistent since the end of August and we are expecting that to continue.”
The Labor Department said the four-week moving average for new jobless claims fell by 16,500 to 496,500, the 12th consecutive week there’s been such a decline. This is significant because the drop is seen by economists as a more accurate gauge since it irons out week-to-week volatility in the data.
Initial jobless claims for the week ended Nov. 21 fell to the lowest level since September 2008, with 466,000 claims, a decline of 35,000 from the previous week’s revised figure of 501,000.
The weekly report comes after other signs that this lagging indicator of the U.S. economy’s health is starting to catch up with the rest of the “green shoots,” including a panel of 48 economists polled by the National Association for Business Economics (job declines will swing back to growth in the second quarter next year.) that said
“We have been losing jobs on the order of about 200,000 per month in the last couple of months,” NABE President Lynn Reaser said in an interview with National Public Radio (NPR . “We think a year from now, companies will be adding about 200,000 jobs per month.”
After the NABE survey results were published, minutes from the Fed’s meeting earlier this month revealed a slightly more optimistic picture for job creation by the end of 2010, revising a previous unemployment range of 9.5% to 9.8% to 9.3% to 9.7%.
Longer term, the Fed isn’t as optimistic for the end of 2012, when the NABE expects the unemployment rate to return to a normal level, which was 4.7% the month before the recession began in December 2007. Instead, the Fed expects the unemployment rate at the end of 2012 to hover between 6.8% and 7.5%.
Consumer Spending Picks Up Heading Into Holiday Season
Although the unemployment rate is still ticking up, more consumers made purchases in October on items excluding food and gas, which could bode well for retailers in a vicious fight for precious sales.
Consumer outlays, which account for two-thirds of the U.S. gross domestic product (GDP), gained 0.7% in October after falling 0.7 in September, according to Commerce Department data.
“This was a very good report that provides some hope that the holiday shopping season will wind up not being the disaster so many had forecast,” Naroff wrote in a note to investors. “I have been making the point that consumers are starting to buy the little things that make their lives better and this report points to that possibility.”
In what probably isn’t a coincidence with the consumer spending data, disposable personal incomes gained 0.4% in October and personal savings dipped further in October to 4.4% of total after-tax income from September’s 4.6%.
Even though firms aren’t hiring, those who are employed may be seeing rewards for being a part of the “doing more with less” movement amid the worst recession to grip the nation since the 1930s. Indeed, the productivity of U.S. workers rose at an annual rate of 9.5% in the third quarter, more than four times the average productivity in the past 25 years.
Confidence Remains Fragile
In spite of a strong rebound since the markets’ March 2009 lows and now signs of hope in the jobs market, consumers are now well aware that this recovery will be a lot slower than they would like as November’s consumer confidence slipped from the previous month.
The Reuters/University of Michigan Survey of Consumers fell to 67.4 in November from October’s 70.6 and 73.5 in September. While that’s still higher than the 55.3 in November 2008 that followed the market meltdown, it shows that consumers are still wary about bearing most of the responsibility for the United States’ economic recovery.
News and Related Story Links:
- The Wall Street Journal:
Consumer Spending Rebounds, As Jobless Claims Fall
- Money Morning:
U.S. Economy Will Grow Faster Than Expected, Jobs to Return to Growth Next Year, Economists Say
Economist: Job Growth Will Resume “Within the Next Few Months”
- Reuters/University of Michigan Surveys of Consumers:
Lackluster Recovery Due to Weak Consumer Finances