Northwest Arkansas Democrat-Gazette
Business data giving signals U.S. on mend
Analysts see hiring uptick as fewer file for jobless aid
Fewer Americans filed claims for unemployment benefits last week, the Labor Department reported Thursday. It was one of several reports that indicate the economy is starting 2012 on better footing than a year ago.
Weekly unemployment benefit applications have fallen to levels not seen in three years. Christmas retail sales were solid, service companies grew a little faster in December, and many small businesses say they plan to add jobs over the next three months.
The mix of private and government data released Thursday sketched a picture of an economy that is slowly strengthening, stoking optimism ahead of today’s Labor Department report on December job growth.
“Businesses have increased hiring to meet the underlying pickup in [consumer] demand,” said Neil Dutta, an economist at Bank of America Merrill Lynch.
The mostly positive reports had little effect on financial markets Thursday.
Traders seemed more focused on the debt crisis in Europe, which could slow U.S. growth later this year.
The Dow Jones industrial average recovered from a 134-point loss to end the day down 2.72 points at 12,415.70.
Applications for unemployment benefits dropped to a seasonally adjusted 372,000 last week, the Labor Department said.
That’s 11 percent lower than the same time last year.
The four-week average, which smoothes fluctuations, fell to 373,250 — the lowest level since June 2008.
When applications drop below 375,000 — consistently — they generally signal that hiring is strong enough to reduce the unemployment rate.
A pickup in hiring will further lift Americans’ moods, raising the odds household spending, which accounts for about 70 percent of the economy, will keep climbing.
“The improvement in the labor market means incomes will grow,” said John Herrmann, a senior fixedincome strategist at State Street Global Markets LLC in Boston. “That will really help consumer spending.”
Steven Wood, an economist at Insight Economics, said applications last year averaged 411,000 per week, down from 459,000 per week in 2010.
That’s “a clear indication that the pace of layoffs has slowed,” Wood said.
The ADP National Employment Report, which measures private-sector payrolls, showed an increase of 325,000 jobs in December, almost half coming from small businesses. Forecasters had expected something in the range of 200,000 new private-sector jobs.
“The increase in December was the largest monthly gain since ... December 2010 and nearly twice the average monthly gain since May, when employment decelerated sharply,” the report said. “Employment in the private, service-providing sector rose 273,000 in December, which is up from an increase of 176,000 in November. Employment in the private, goods-producing sector increased 52,000 in December.”
U.S. service firms, which employ roughly 90 percent of the work force, grew a little faster in December, according to the Institute for Supply Management.
The trade group of purchasing managers said its index of nonmanufacturing activity rose to 52.6. That’s slightly above November’s reading of 52 — the lowest in nearly two years — but well below last year’s high of 59.7 recorded in February.
Any reading above 50 indicates expansion.
An increase in new orders and stronger imports drove last month’s modest expansion. But a gauge of hiring showed many service firms were hesitant to add workers.
Retailers on Thursday reported solid but not spectacular sales gains last month. And much of the increase stemmed from heavy discounting that will likely cut into profits.
Small businesses remain encouraged about their plans to hire over the next three months. The National Federation of Independent Business said the proportion of those firms that expect to add workers is slightly off from the three-year high hit last month.
Economists are predicting that overall hiring increased in December and will strengthen this year.
John Ryding, an economist at RDQ Economics, estimates that employers added 180,000 jobs last month, a big jump from November’s 120,000 net jobs.
Economists surveyed by The Associated Press project that the economy will generate an average of 175,000 jobs per month this year. That would be a step up from average monthly gains of 130,000 last year and 78,000 in 2010.
In November, the nation’s unemployment rate fell to 8.6 percent from 9 percent. Still, about half that decline occurred because many of the unemployed gave up looking for work. When people stop looking for a job, they’re no longer counted as unemployed.
Growth likely topped 3 percent at an annual rate in the final three months of 2011, economists said. That would be a sharp improvement over the 1.8 percent growth in the July-september quarter.
Even so, many economists said that growth could slow to roughly 2 percent this year. Europe is almost certain to fall into recession because of its financial troubles, economists say. And without more jobs and higher incomes, consumers may have to cut back on spending. That could drag on growth in 2012. Information for this article was contributed by Christopher S. Rugaber and Martin Crutsinger of The Associated Press; by Shobhana Chandra and Alex Kowalski of Bloomberg News; and by Kevin G. Hall of Mcclatchy Newspapers.