Two-year low for layoffs hints at hiring pickup
WASHINGTON—November marked a two-year low for the number of people applying for initial unemployment benefits, suggesting that the tight job market may be easing at last.
The slowing of layoffs and a solid month for retailers are the latest evidence of a strengthening economy in the final months of the year. Even the struggling housing market showed signs of improvement: On Thursday, it posted a third straight monthly increase in signed contracts for home purchases.
Some economists are now sketching a more optimistic forecast for Friday's report on November employment, though few expect a change in the 9.6 percent unemployment rate.
Still, the encouraging news helped extend a rally on Wall Street. The Dow Jones industrial average surged 106 points to close at 11,362. That's after it jumped 249 points Wednesday, its biggest gain since Sept. 1.
"We are starting to get some self-sustaining momentum in the economy," said Nigel Gault, chief U.S. economist at IHS Global Insight.
Gault predicts that private companies added a net total of 180,000 jobs last month -- a bump-up from his earlier forecast of 160,000 new jobs. In October, private companies added a net 159,000 jobs. That marked a spurt of job creation after hiring had all but stalled pretty much all summer.
"As jobs pick up, that is making consumers a bit more confident and willing to spend," Gault said.
The number for job growth is likely to be a little lower after subtracting declines in government payrolls. Gault and other economists on the optimistic end expect the overall economy added 170,000 net jobs last month. Still, the consensus forecast is for an overall gain of 145,000. Last month, the economy added a total of 151,000 jobs.
The number of people applying for unemployment benefits actually rose last week, by 26,000 to a seasonally adjusted 436,000, the Labor Department said Thursday. Still, the figures are often volatile during the weeks around the Veteran's Day and Thanksgiving holidays.
A more telling figure was a decline in the four-week moving average of claims, which smooths volatility. That fell to 431,000 last week -- a two-year low.
"After being little changed for most of the year, new jobless claims have broken to the downside in the last several weeks, suggesting that labor markets may actually be improving," said Steven Wood, chief economist for Insight Economics.
Applications for unemployment benefits have fallen below 450,000 in each of the past four weeks, after hovering above 450,000 for most of the year. That's a big improvement from March 2009, when applications peaked at 651,000.
Still, even if the optimistic job projections for November prove accurate, they won't be strong enough to drive down the unemployment rate. Most economists think the jobless rate will be unchanged in November. That would mark the 19th straight month that the unemployment rate topped 9 percent, the longest stretch on records going back to 1948. The previous record stretch was set in the early 1980s.
The economy would need to consistently add 200,000 to 300,000 a month to make a noticeable dent in the unemployment rate, analysts say. It could take until near the end of this decade to drop the unemployment rate to a more normal 6 percent, they say.
"As the economy continues to gain strength and optimism continues to grow among businesses, hiring will strengthen," Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said in a speech Thursday. "As it does, the unemployment rate will decline, but it will be a gradual decline. The shocks we experienced were huge, and it will take some time for the imbalances in labor markets to be resolved," he said.
Under his own forecast, Plosser says the unemployment rate will drop only to around 8 to 8.5 percent by the end of next year.
Still, analysts said they are encouraged that the economy is showing more signs of improvement.
Other reports out Thursday suggested 2010 will finish stronger:
-- Stores reported sales gains in November that topped Wall Street expectations included Costco Wholesale Corp., Target Corp., the owner of Victoria's Secret and teen retailer Abercrombie & Fitch. The results are boosting hopes that shoppers will spend more during the holiday season.
The International Council of Shopping Centers' index reported a 5.8 percent gain. It marked the biggest increase since March when a quirk of the Easter calendar resulted in a 9 percent gain. Aside from that month, the last time retailers reported such a big increase was in September 2006, when it registered 6.2 percent increase.
-- The National Association of Realtors said the number of people who signed contracts to buy homes jumped in October, marking the third gain since contract signings hit a low in June. The association's index of sales agreements for previously occupied homes rose 10.4 percent in October. Contract signings were up in every region of the country except the West.
And earlier this week, other economic reports showed that factories are pumping out more goods, construction spending is up and auto sales are rising.
"We are heading in the right direction. The economy is going from a crawl to walking speed," said Ken Mayland, president of ClearView Economics. "It isn't a trot or a gallop but it is a faster pace."