Encouraging news extends Wall Street rally
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 sketched a more optimistic forecast for today’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 more than 90 points. 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 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.
Still, analysts said they are encouraged that the economy is showing more signs of improvement.