Signs of brightening economy
Latest reports cite fewer layoffs; more spending by businesses, consumers
WASHINGTON — Economic reports released yesterday suggest employers are laying off fewer workers, businesses are ordering more computers and appliances, and consumers are spending more confidently.
Combined, the latest figures confirm that the economy is improving, even though too few jobs are being created to lower the national 9.8 percent unemployment rate.
The number of people seeking unemployment benefits edged down by 3,000 to a seasonally adjusted 420,000, the Labor Department said. That was the second drop in three weeks.
Weekly unemployment applications at around 425,000 signal modest job growth. But economists say the number would need to dip consistently to 375,000 or below to indicate a significant decline in unemployment. Weekly applications peaked during the recession at 651,000 in March 2009.
The four-week average, a less volatile gauge, rose slightly to 426,000. The average had fallen for six straight weeks to the lowest point in more than two years.
Companies increased their orders for long-lasting manufactured products, excluding volatile transportation goods, by the sharpest amount in eight months, the Commerce Department said. Demand rose for computers, appliances, and heavy machinery.
Total orders for durable goods dropped 1.3 percent, a decline that reflected sagging demand for aircraft and autos. But excluding transportation, orders surged 2.4 percent, the best showing since last March.
Personal spending rose modestly last month, giving the economy a lift before the holidays. Spending increased 0.4 percent, the fifth straight monthly increase.
Incomes grew 0.3 percent last month, lifted by gains in stock portfolios. Wages and salaries barely budged, and hiring slowed.
Housing remains a drag on the economy. More people bought new homes last month, though far too few to signal better times are ahead for the battered housing industry. Sales rose 5.5 percent to a seasonally adjusted annual rate of 290,000 units, the government said. That’s less than half the rate that economists consider healthy. And the increase follows a dismal October pace that nearly matched the lowest level in 47 years.
The economy is expected to pick up next year as consumers spend more freely. Most Americans will have more cash to spend because of a cut in Social Security taxes that Congress approved this month. But economic growth probably won’t be fast enough to quickly reduce unemployment.
Many analysts are predicting that the economy will grow at a 3.5 percent to 4 percent annual pace next year. That would be up from an expected 2.8 percent pace this year.
Economists generally say growth needs to reach 5 percent for a full year to bring down the unemployment rate by 1 percentage point. Many expect the rate to be near 9 percent by the end of next year.
The recent decline in the number of people seeking unemployment benefits has encouraged economists. Applications have fallen by more than 20,000 in the past month. That should translate into more hiring, according to most economists. The economy added a net total of only 39,000 jobs last month, and the unemployment rate rose to 9.8 percent.