Posted on 01/05/2006 11:49:58 AM PST by FreeKeys
The number of U.S. workers seeking new jobless benefits fell last week to its lowest in over five years, the government reported on Thursday and a private group said the services sector grew last month, boding well for the economic outlook.
The strong data came one day before the closely watched Labor Department report on employment. Economists expect a solid 200,000 gain in nonfarm payrolls in December, with the jobless rate holding steady at 5 percent.
In other data, major U.S. retailers on Thursday reported that deep discounts lured holiday shoppers last month and pushed sales slightly ahead of modest expectations, but a disappointing profit forecast from Wal-Mart raised concerns.
Wal-Mart, the world's biggest retailer, said its fourth-quarter profit would likely reach only the low end of its forecast after a disappointing December. Wal-Mart posted just a 2.2 percent increase in December sales at U.S. stores open at least a year.
HOLIDAY VOLATILITY
The unexpected fall in jobless claims was not the product of a particular special factor, a government analyst said, but cautioned there is often volatility around holidays.
In its weekly report, the Labor Department said 291,000 initial claims for state jobless benefits were filed last week, the lowest since September 2000 and down from a revised 326,000 in the prior week. It was the largest weekly drop since late September.
The decrease in claims outstripped Wall Street's expectations. Analysts had expected claims to dip slightly to 320,000 last week from the originally reported 322,000.
"The jobless claims drop shows good strength in the labor market at the end of the year," said Gary Thayer, chief economist at A.G. Edwards & Sons in St. Louis. "It shows that the economy has recovered after the hurricanes and is heading into the new year with good momentum and good job prospects."
PINCH OF SALT
But some said the data should be taken with a grain of salt. "It's Christmas, it's a difficult week for seasonal adjustments," said David Sloan, an economist with 4CAST Ltd. in New York.
The larger-than-expected drop brought a four-week moving average of initial claims, which smooths weekly volatility to provide a better view of underlying labor market trends, down by 9,250 to 316,750, its lowest level since August.
Benchmark 10-year U.S. Treasuries prices were weaker on the day but recouped some of their earlier losses as the weaker home sales data offset some of the negative sentiment sparked by the strong jobless claims figures. The 10-year note price was down 5/32 at midday to yield 4.37 percent.
A separate report from the Institute for Supply Management showed the U.S. services industry expanded further in December, as inflation within the sector eased, and new orders rose.
The U.S. service sector -- which accounts for more than two-thirds of the economy -- grew in December, aided by lower energy costs, rising new orders and continued job growth.
ISM reported its non-manufacturing index rose to 59.8, from 58.5 in November, above forecasts for a rise to 59.0.
The number 50 divides growth from decline in the sector, which includes any sort of business from restaurants and travel agencies to banks and beauty parlors.
"All the components are above the break-even point of 50. There is also relief in the prices paid component from lower energy costs along with easing in delivery time," said Lynn Reaser, chief economist at Banc of America Capital Management in Boston.
"The jobs component remains quite strong versus the November figure. On balance, the bulk of the U.S. economy bodes well for solid growth in 2006," she said.
The employment component edged up to 57.1 in December from 57.0, while the prices-paid gauge fell to 69.5 from 74.2.
Minutes from a mid-December meeting of Federal Reserve policy-makers released on Tuesday showed some officials think the United States might currently be near full employment.
The Fed has hinted its 18-month long policy-tightening campaign may soon be over but officials have warned that a tighter labor market could raise the risk of inflation and give the bank a reason to keep raising rates.
Since June 2004, the Fed has brought rates up to 4.25 percent with a series of gradual increases and financial markets are pricing in a quarter-point increase at the next meeting on January 31 and some chance of another rise in March.
LAYOFFS UP, HOME SALES DOWN
In a separate report on Thursday, the employment consulting firm Challenger, Gray & Christmas Inc said planned U.S. layoffs rose 8.6 percent in December, pushing the 2005 annual total of job cuts 3.1 percent higher than in 2004.
The firm said there were 107,822 layoffs announced in December, compared with 99,279 in November. In 2005, U.S. employers announced 1,072,054 job cuts, compared with 1,039,735 in 2004, Challenger said.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in December, fell to 120.6 in November, down 2.5 percent from both October and a year ago and its lowest reading since January 2005.
Home sales have slowed in recent month's as the Fed's rate rises have finally begun to rein in the housing market.
I wonder if these reports on the economy have any validity at all.
And just to be a contrarian:
Good economy or bad, layoffs now seem to be par for the course in corporate America.
According to a new labor report released this morning, corporations announced nearly 1.1 million job cuts in 2005, marking the fifth consecutive year where more than 1 million workers were laid off.
snip
I stopped by the Herbert Hoover Presidential Library in West Branch, Iowa last Fall. The guy was a good man totally demonized for the Great Depression (he did do some things wrong in reaction to it).
But nobody every asks the question, if FDR was great, why did the Great Depression last for 8 years under him (1933 to 1941 - until WWII started)? What the heck did he do in those eight years to stimulate the economy?
More proof that Bush is a failure - he's putting the people at the unemployment office out of a job.
haha yeah, horrible economy alright! =P
Economics 101...a raise in income yields a drop in demand for inferior goods (i.e, Walmart).
This poor economy is forcing shoppers to go to more expensive outlets!
It's all Bush's fault!! :-)
GO "W" GO !!
***What the heck did he do in those eight years to stimulate the economy?***
I can tell you what CLINTON did in HIS eight years to stimulate...oh wait, nevermind, there could be children on this thread. =P
I'm glad the hundreds of thousands of the wealthiest 1% are finally getting some jobs thanks to the tax cuts they received 3 years ago.
Aha. Good point! Thanks for posting that and giving me the opportunity to point out THIS new Walter Williams column on ECONOMIC FLEXIBILITY and American INCOME MOBILITY!
Say now, is "American INCOME MOBILITY!" just a euphemistic way of saying it goes from my wallet into someone else's?
I'll go read Walter's article.
I know I am definatly glad.
I just wish we had bigger tax cuts.
I'm sure the New York Times will headline this as "Jobless claims drop as more people give up even looking for jobs in hopeless despair over terrible Bush economy."
We are still suffering from the effects of his cursed Raw Deal programs.
"According to a new labor report released this morning, corporations announced nearly 1.1 million job cuts in 2005, marking the fifth consecutive year where more than 1 million workers were laid off."
Yes, the economy is now big enough that 1,000,000 jobs are routinely eliminated.
Hate to break it to you, but if the current weekly 291,000 initial jobless claims hold, that's over 15,000,000 jobs lost this year. Fortunately, America will probably generate over 18,000,000 new jobs. So cheer up!!!!
"Fire one million"
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.