Jobless claims ease U.S. labor market concerns

BLOOMBERG — Claims for unemployment benefits declined last week to the lowest level in a month, easing concern that the U.S. labor market is faltering.

First-time claims dropped by 1,000 to 367,000 in the period ended May 5, the Labor Department said Thursday (May 10).

Other reports showed that a gauge of consumer confidence declined to a three-month low, and the trade deficit widened on rising demand for imports from oil to autos.

Claims are returning to levels reached in February and March, indicating a surge last month probably reflected difficulty in adjusting the data for an Easter holiday that came earlier this year than last. Declines in dismissals point to a brighter labor market that would help sustain consumer spending after payroll growth slowed last month.

“The health of the labor market is improving,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. Hoffman is the most accurate forecaster of payrolls in the two years ended in March, according to Bloomberg data.

“It gives me a little bit of encouragement that the May employment report won’t be a third-strike-you’re-out type of number.”

The median forecast of 47 economists surveyed by Bloomberg News called for 368,000 applications last week. Estimates ranged from 345,000 to 380,000. The Labor Department revised the previous week from 365,000.

The latest week’s figure compares with an average of 373,000 claims since the end of February. Initial jobless claims reflect weekly firings and tend to fall as job growth —measured by the monthly non-farm payrolls report — accelerates.

American employers added fewer workers than forecast in April and the jobless rate unexpectedly fell as people left the labor force, the Labor Department said on May 4. Payrolls climbed 115,000, the smallest gain in six months, after a 154,000 March increase.

LABOR PARTICIPATION
About 40% of the decline in the U.S. labor force participation rate since 2000 can be explained by demographic factors such as the retirement of the baby boomers, Federal Reserve Bank of Atlanta Research Director David Altig said in an online commentary.

The decline in the labor force has been “influenced by a confounding mix of demographic change and other behavioral changes that nobody seems to understand,” Altig wrote in an online posting on his Macroblog site.

Federal Reserve Chairman Ben Bernanke says the decline reflects weakness in the economy that’s causing discouraged Americans to leave the workforce.

The participation rate, which indicates the share of working-age people in the labor force, fell to 63.6 percent last month, the lowest since December 1981, from 63.8 percent the month before. The unemployment rate fell last month to a three- year low of 8.1 percent as people left the labor force.

Altig said that 0.9 percentage points of the decline in the participation rate since the beginning of the last recession in December 2007 can be explained by demographic trends. Subtracting those “still leaves 1.5 percentage points to be explained” by the weak economy.

CONSUMER CONFIDENCE
A rebound in job growth would help shore up consumer confidence, which fell in the week ended May 6 to the lowest level since early February. Consumer spending accounts for about 70 percent of the economy.

The Bloomberg Consumer Comfort Index declined to minus 40.4, a level associated with recessions or their aftermaths, from minus 37.6 in the previous period. The gauge has declined for three straight weeks and given back more than half its gain from the end of 2011 through mid-April.

Readings lower than minus 40 are correlated with “severe economic discontent,” according to Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg. The gauge has averaged minus 15.3 since its inception in December 1985.

Two of the index’s three components declined. The gauge of personal finances fell to minus 11.2, the weakest reading since November, from minus 6.6. A measure of whether consumers consider it a good or bad time to buy slipped to minus 45.8, a three-month low. Americans’ views on the state of the economy were little changed at minus 64.2.

The comfort index’s 9-point decline since April 15 also marks the biggest three-week slide since March 2011. The gauge reached a four-year high in the week ended April 15.

CONSUMER SPENDING
Also, Commerce Department figures reported Thursday on the trade deficit pointed to strong domestic demand as U.S. consumers and companies bought imported crude oil, computers, automobiles and televisions.

The deficit widened 14% to $51.8 billion. The median estimate of economists surveyed by Bloomberg called for an increase to $50 billion. A 5.2% jump in imports, the biggest in more than a year, swamped the 2.9% gain in exports, which also reached a record.

The trade report “is an indication that consumer spending has remained quite strong in March,” said Millan Mulraine, a senior U.S. strategist at TD Securities in New York. “We should see some of that positive momentum carry into the second quarter.”

Imports from China climbed 12% in March after plunging the prior month as the Lunar New Year holidays extended into early February. The March trade gap with China widened to $31.5 billion from $28.1 billion, today’s report showed.