Sunday, April 15, 2012

Jobless Claims in U.S. Rose Last Week to Two-Month High

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More Americans than forecast filed applications for jobless benefits last week, reinforcing concern among Federal Reserve policy makers that the labor-market recovery will be slow to develop.

Unemployment claims increased 13,000 in the week ended April 7 to 380,000, the highest since Jan. 28, the Labor Department reported today in Washington. The median forecast in a Bloomberg News survey called for 355,000 claims. Other reports showed consumer confidence held near a four-year high and the trade gap narrowed more than projected.

The claims data, coming on the heels of last week’s weaker- than-forecast payroll number, raise the possibility that the job gains that drove unemployment down to a three-year low last month will moderate. Fed Vice Chairman Janet Yellen and Fed Bank of New York President William C. Dudley said over the past 24 hours that they support keeping the central bank’s main interest rate low through late 2014 to help reduce joblessness.

“There’s a modest recovery in the labor market, but still a ways to go,” said Michael Hanson, a senior U.S. economist at Bank of America Corp. in New York.

“There’s a number of tailwinds for the labor market that are fading a bit,” he said. “And there are a number of headwinds that are still out there,” including the European debt crisis and possible U.S. government budget cuts early next year.

Stocks rose, sending the Standard & Poor’s 500 Index higher for a second day, as the possibility that the Fed will keep interest rates low overshadowed the increase in claims. The S&P 500 climbed 1.4 percent to 1,387.57 at the 4 p.m. close in New York.

Confidence Holds Up

The increase in jobless applications has yet to damp confidence. The Bloomberg Consumer Comfort Index (CONCCONF) was minus 32.8 in the period ended April 8, second only to the prior week’s minus 31.4 as the highest since March 2008. Households were the most optimistic about their finances since April 2008.

The claims week included Good Friday, prompting some economists to downplay the jump in claims. Because the Easter holidays come at different times during the year, it makes it more difficult for the government to adjust the data for seasonal variations.

“I wouldn’t make too much out of just one reading,” said Kevin Cummins, an economist at UBS Securities LLC in Stamford, Connecticut. “We don’t think it’s likely to soften going forward, regarding employment data. Other indicators of the labor market are pretty solid.”

Claims in the prior week were revised to 367,000 from a previously reported 357,000.

Survey Results

Estimates of the 46 economists in the Bloomberg survey ranged from 350,000 to 372,000. The four-week moving average, a less-volatile measure than the weekly figures, increased to 368,500 last week from 364,250.

J.C. Penney Co. (JCP) this month said it will eliminate nearly 1,000 jobs as it seeks to revive sales. Sears Holdings Corp. (SHLD) will close 62 of its 4,010 stores in the first half of the year, Best Buy Co. will shutter 50 of its big-box locations, the company announced in March.

Employers added 120,000 jobs in March, half as many as in February and the fewest in five months, a report from the Labor Department showed last week. Almost three years after the recovery began, employment remains 5.2 million short of the pre- recession peak.

The report also showed the jobless rate dropped to 8.2 percent, the lowest since January 2009, as the workforce shrank.

Fed View

Yellen, speaking yesterday in New York, echoed Fed Chairman Ben S. Bernanke by saying unemployment will decline “only gradually.” U.S. central bankers next meet on April 24-25 to debate policy for an economy that Yellen said may be sapped by government spending cuts and the European debt crisis.

Dudley said today that the economy may be gaining strength even as last week’s Labor Department report on the job market highlights risks to growth. “It is still too soon to conclude that we are out of the woods,” he said, adding he still supports holding the Fed’s main interest rate close to zero through late 2014.

In the euro-area, industrial production unexpectedly rose in February, driven by a weather-related surge in energy output, figures from the European Union’s statistics office in Luxembourg showed today.

Elsewhere, Bank of Japan Governor Masaaki Shirakawa pledged to continue to add monetary stimulus amid growing calls from politicians for the central bank to do more to end deflation, or a persistent drop in prices.

Trade Gap Shrinks

Another report today showed the trade deficit in the U.S. narrowed more than forecast in February as imports fell by the most in three years, reflecting the smallest amount of crude oil purchases in 15 years and a drop-off in demand for Chinese goods.

The gap shrank 12 percent to $46 billion, the smallest since October, from a revised $52.5 billion in January, the Commerce Department said. The median estimate of 73 economists surveyed by Bloomberg called for a deficit of $51.8 billion in February. Purchases of foreign goods decreased by 2.7 percent, the biggest decline since February 2009. Exports barely rose to reach a record.

The Chinese Lunar New Year holiday may have contributed to the slump in imports, indicating demand will probably rebound as U.S. consumer spending improves. At the same time, sales overseas by American companies may moderate as parts of Europe stagnate and China slows.

Lunar New Year

“As domestic demand begins to gain some momentum you should start to see imports pick up,” said UBS’s Cummins. “It appears that the drop in imports was reflective of the Chinese New Year. We’ve assumed slower export growth based on global growth slowing in 2012.” At the same time, he said, “it doesn’t appear that exports are likely to be a significant drag on the U.S. economy.”

Economists at Goldman Sachs Group Inc. and JPMorgan Chase & Co. were among those boosting their tracking estimates for first-quarter gross domestic product based, in part, on the improvement in the trade account.

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