Job market has made gradual progress

Economy

comes at a critical time when the economy is showing signs of improvement elsewhere.

A recovery in the housing market is looking more sustainable. On Thursday, the government said new-home sales increased in November at the fastest seasonally adjusted annual pace in 2½ years.

And the job market has made slow but steady gains in recent months. The average number of Americans applying for unemployment benefits over the past month fell to the lowest level since March 2008.

But the political wrangling in Washington threatens the economy’s slow, steady progress.

President Barack Obama and House returned to Washington Thursday to resume talks with just days to go before the deadline.

But Senate Majority Leader Harry Reid warned that the government appears to be headed over the fiscal cliff because talks had stalled. The Nevada Democrat made the comments minutes after the consumer confidence report was released.

The combination of weaker consumer confidence and dimming hopes of a deal on the “fiscal cliff” hit financial markets hard Thursday.

The Dow Jones industrial average dropped 132 points in early-afternoon trading. Broader indexes also declined.

A short fall over the cliff won’t push the economy into recession. But most economists expect some tax increases to take effect next year. That could slow economic growth.

While consumers are more worried about where the economy is headed, they were upbeat about present conditions, according to the latest survey. Their assessment of current economic conditions rose this month to the highest level since August 2008. A key reason is that gas prices hit a 2012 low of $3.21 a gallon last week. Normally, that would prompt consumers to spend more on holiday shopping.

But the opposite has happened. A report from MasterCard Advisors Spending pulse indicated sales grew in the two months before Christmas at the weakest rate since 2008, when the country was in a deep recession.

There were other distractions this holiday season. In late October, Superstorm Sandy battered the Northeast and mid-Atlantic states, which account for 24 percent of U.S. retail sales. That coupled with the presidential election, hurt sales during the first half of November.

Shopping picked up in the second half of November. But “fiscal cliff” worries dampened sales in December.

The National Retail Federation, the nation’s largest retail trade group, remains optimistic sales won’t be quite as bad as earlier reports have suggested. It is sticking to its forecast for total sales for November and December to be up 4.1 percent to $586.1 billion this year.