The number of applications for unemployment benefits unexpectedly dropped last week to the lowest level in three years, showing the U.S. labor market is healing.
Jobless claims dropped by 19,000 to 366,000 in the week ended Dec. 10, the fewest since May 2008, Labor Department figures showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg News projected 390,000.
Slowing dismissals pave the way for an increase in employment that may help spur consumer spending, which accounts for about 70 percent of the economy, during the holiday shopping season. Nonetheless, the threat of a recession in Europe brought on by its sovereign debt crisis, and political wrangling over the U.S. budget, is restraining companies from expanding staff.
“We’re seeing improvement in labor-market conditions,” said Julia Coronado, chief economist for North America at BNP Paribas in New York. “It’s good to see claims moving this much below 400,000.”
A Labor Department spokesman said there was nothing unusual in the state level data last week.
A separate Labor Department report showed the producer price index increased 0.3 percent last month after declining 0.3 percent in October
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Wholesale Prices in U.S. Rose in November
Prices paid to U.S. wholesalers excluding food and fuel rose less than forecast in November, indicating inflation will remain contained.
The so-called core measure increased 0.1 percent, less than the 0.2 percent gain projected by the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The producer price index climbed 0.3 percent, paced by a 1 percent advance in food expenses.
Slowing growth from Europe to Asia may restrain the cost of raw materials, while subdued job growth and stagnant wages may hold down demand in the U.S., giving companies little room to raise prices. Less inflation would validate Federal Reserve policy makers in their renewed pledge this week to hold rates “exceptionally low” at least through mid-2013.
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Retail Sales in U.K. Drop More-Than-Forecast 0.4% as Recession Risk Grows
U.K. retail sales fell more than economists forecast in November as cash-strapped households shunned a second month of price discounts and chose to save rather than spend amid warnings of a looming recession.
Sales including fuel fell 0.4 percent from October, the Office for National Statistics said today in London. The median forecast of 23 economists in a Bloomberg survey was for a 0.3 percent decline. Excluding auto fuel, retail sales fell 0.7 percent on the month.
The figures underline the pressure being felt by consumers as wages fail to keep pace with inflation and concern mounts that the economy is following the crisis-stricken euro region into recession. Unemployment hit a 17-year high of 2.64 million in the three months through October and is forecast to rise further next year.
“All in all, the picture for U.K. household consumption is not very encouraging,” said Annalisa Piazza, an economist at Newedge Group in London. “The labor market is extremely weak. Average earnings run at less than half the speed of inflation and consumer confidence hit record-low levels. We expect fourth- quarter household consumption to be a drag for GDP growth.”
The pound was trading at $1.5508 as of 12:05 p.m. London time, up 0.2 percent on the day.
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Manufacturing From China to Europe May Shrink as Demand Weakens: Economy
Manufacturing may contract this month from China to the euro region as global demand slows and Europe’s leaders struggle to contain the worsening debt crisis.
Chinese factory output may decline for a second month in December as Europe’s fiscal woes weigh on exports and home sales slide, preliminary results from a Markit Economics survey indicate. In the euro area, manufacturers may face a fifth straight month of contraction as the region endures its worst quarter for 2 1/2 years, a separate report showed.
Ripples from Europe’s debt turmoil have dented confidence among companies and consumers and hit global demand. The Organization for Economic Cooperation and Development said last month that trade in goods stalled in most major economies in the third quarter and it cut its growth forecast. The slowdown is spilling over into unemployment, with Nokia Siemens Networks announcing last month that it plans to eliminate 17,000 jobs worldwide.
“The near-term outlook is still bleak” in Europe, said Stella Wang, an economist at Nomura International Plc in London. “With the uncertainty about the sovereign debt crisis and slowing momentum of the euro area’s main trading partners, both businesses and consumers look set to continue holding back their investment and consumption decisions going into 2012.”
U.S. Production
U.S. industrial-output may have cooled in November as slowdowns in automobile output and mining overshadowed broader manufacturing strength, economists said before reports today.
Production at factories, mines and utilities increased 0.1 percent after advancing 0.7 percent in October, according to the median of 82 estimates in a Bloomberg News survey. Manufacturing in the New York and Philadelphia regions picked up in December, a sign the industry is weathering slower global growth, a pair of regional reports may also show.
