New US claims for jobless benefits fell last week and retailers racked up much stronger-than-expected sales in March, signs that high fuel prices have not knocked the economy off its growth path. Initial claims for state unemployment aid slipped 10,000 to 382,000, the Labour Department said on Thursday, a touch below economists' expectations and firmly beneath the 400,000 level associated with steady jobs growth.
-- Continuing claims lowest since October 2008
Other data showed shoppers shrugged off higher gasoline prices last month to boost sales at many retailers as improving labour market conditions encouraged discretionary spending. Same-store retailer sales had been expected to decline for the first time since August 2009, in part because Easter falls three weeks later than last year, delaying some spending.
"The claims report is one more piece of evidence that the general labour market is improving," said Patrick O'Keefe, head of economic research at J.H. Cohn in Roseland, New Jersey. "The economy is growing and employers are no longer laying off workers because of a weakening in the general economic conditions but rather they doing so for normal business reasons."
The claims data underscored the strengthening labour market tenor and came on the heels of a report last week showing employers added 216,000 jobs in March, with the unemployment rate falling to a two-year low of 8.8 percent. Last week, the four-week average of unemployment claims, a better measure of underlying trends, fell 5,750 to 389,500.
With the labour market conditions firming, consumers are feeling a little more confident to loosen their purse strings. Sales at stores open at least a year rose 1.7 percent in a tally of 25 retailers, topping expectations of a 0.7 percent decline, according to Thomson Reuters. The stronger-than-expected same-store sales bode well for the government's overall retail sales report for March, which is scheduled for release next week and is expected to be heavily influenced by the high gasoline prices.
They offered some relief after other data on consumer spending suggested a moderation in the pace of economic growth early in the year after a fairly brisk pace in the fourth quarter. Consumer spending - which accounts for about 70 percent of US economic activity - got off to slow start in the first two months of 2011 - held back by bad weather. Rising gasoline prices also took spending away from other sectors.
The stronger-than-expected same-store sales were little boosted by inflation, given the nature of the merchandise which economists said was less sensitive to the high energy prices. "Consumers have held back for a long time, there is a certain amount of pent-up demand. Wage growth isn't much, but we are also seeing an increase in income because of an increase in job growth," said Steve Blitz, a senior economist at ITG Investment Research in New York. "Job growth also means that for those who are employed there is reduced concern about being laid off so the pent up demand is coming out."
With the latest fall, initial claims for jobless benefits are now beneath the 400,000 level, which is generally associated with steady job growth, for four weeks in a row. The four-week average has held below that mark for the sixth straight week. Economists say both measures need to drop to about 300,000 to signal a strong labour market recovery.
Signs of improvement in the jobs market were also evident in the number of people still receiving benefits under regular state programs after an initial week of aid, which fell in the week ended March 26 to the lowest level since October 2008.
However, long-term unemployment remains a major problem. A total of 8.52 million people were claiming unemployment benefits under all programs in the week ended March 19, the latest week for which data is available. "While the labour market has stabilised and employment may be increasing, it's not increasing so rapidly that previously unemployed people who were claiming benefits are returning to work at a fast clip," said J.H. Cohn's O'Keefe.