Consumers Curbed Spending, Jobs Picture Weak
Thursday January 9, 4:40 pm ET
By Joanne Morrison
Reuters
WASHINGTON (Reuters) - U.S. consumers kept a tight hold on their wallets during the holiday season as the economy inched ahead, while the labor market outlook looked bleak, reports on Thursday showed.
ADVERTISEMENT
Key U.S. retailers on Thursday confirmed that last year's holiday shopping season, overshadowed by economic uncertainty and a shortened Thanksgiving to Christmas shopping period, was indeed disappointing and could see the smallest gain in sales in three decades.
At the same time, the labor market has improved very little, according to the government's latest report.
On Thursday the Labor Department reported that fewer people signed up for state unemployment benefits last week, but analysts took little stock in that decline, instead warning the level of new applications is still high and shows the labor market is struggling.
"I view the claims numbers as fluctuating in a range that suggests pretty soft employment numbers," said Rick Egelton, deputy chief economist at BMO Financial Group in Toronto.
The government is scheduled to release its monthly take on the U.S. employment situation on Friday. Analysts are expecting the unemployment rate to hold steady at 6 percent, but they say businesses likely added a scant 22,000 jobs in December, not enough for a struggling economy.
A separate government report showed stocks on U.S. wholesalers' shelves rose as expected in November, suggesting manufacturers may be cautiously gearing up for better economic times.
Wholesale inventories rose 0.2 percent November after sliding 0.5 percent in October, the Commerce Department said. The increase was completely in line with Wall Street expectations, but inventories were down 1.7 percent from November a year ago.
STOCKS UP
Stocks fared well on Thursday amid strong quarterly earnings announcements from technology names like Foundry Networks Inc. and as retailers' sales, even though disappointing, came in as expected.
According to the latest figures, the blue-chip Dow Jones industrial average ended up 180.87 points, or 2.1 percent. The broader Standard & Poor's 500 Index gained 17.65 points, or 1.94 percent and the technology-laced Nasdaq Composite Index ended up 37 points, or 2.67 percent.
U.S. Treasury securities prices fell amid a flood this week of corporate, agency and sovereign debt amounting to more than $35 billion.
SALES DISAPPOINTING BUT EXPECTED
Wal-Mart, the world's biggest retailer managed to meet its lower December sales target, but others ranging from toy seller Toys R Us Inc. to department store chain Kohls Corp. missed their marks.
"The Christmas selling season proved disappointing even relative to our own cautious expectations," said Martin Bukol, retail analyst with Northern Trust's asset management arm. "We think there is risk to companies' sales and bottom lines."
While Wal-Mart managed to meet its sales expectation, the discount retailer said a last-minute surge in holiday shopping came too late to make up for a sluggish start.
{Harry: This says it all. When a discount retail can
sell things, the economy is really bad.]
Same-store sales -- a key measure for the retail industry because they factor out newly opened or closed stores that can skew the demand picture -- are expected to show the worst gain in 30 years.
The Bank of Tokyo-Mitsubishi reported on Thursday that November and December same store sales were up just 0.5 percent from a year earlier, the smallest gain since the bank began tracking weekly sales in 1970.
"It's hard to remember the last time when stalwarts like Wal-Mart, Kohl's and Target all slumped together," said Kevin Tawes, retail analyst with Independence Investments, an affiliate of John Hancock Financial Services.
JOBLESS CLAIMS DOWN IN LATEST WEEK
In it's report, the Labor Department said first-time claims for state unemployment insurance benefits fell to a seasonally adjusted 389,000 in the week ended Jan. 4, from a revised 408,000 the previous week, the Labor Department said.
That decline was bigger than expected. Wall Street analysts had forecast, on average, claims would inch down to 397,000. But the report is typically volatile during this time of year. Still, economists took little stock in the bigger-than-expected decline.
"About all you say about the claims figures is that they are oscillating around 400,000 and that suggests no real strengthening in the labor market," said Ram Bhagavatula, chief economist at Royal Bank of Scotland Financial Markets.
The report was released the day after President Bush signed into law a $7.2 billion jobs package, giving unemployed workers an extra 13 weeks of benefits after they have exhausted the normal 26 weeks.
The decrease in claims brought down the four-week moving average, which irons out weekly fluctuations, to 406,000 from 419,750 in the prior week, breaking a four-week pattern of gentle rises that began in early December.
But those Americans who are jobless are remaining that way. The number of people who continued to draw a week of benefits, so-called continued claims, rose to 3.45 million in the week ended Dec. 28, the latest week for which data are available. |
