U.S. economy showing modest improvement
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Brighter economic news on a number of fronts Thursday sent Wall Street higher and set the stage for the last unemployment report before a presidential election in which economic issues have been front and center.
Automakers reported strong sales in October despite losing three days to Hurricane Sandy, while the Conference Board said consumer confidence reached its highest level in four years. Meanwhile, payroll processer ADP said the private sector added 158,000 jobs in October, the most since February.
PNC Financial Services Group chief economist Stuart Hoffman said 158,000 jobs "is a decent increase, but over 200,000 is healthy."
"The data was mixed, but more to the positive side," Mr. Hoffman said. "The economy has picked up some momentum, but it still isn't up to par."
There were more modest improvements on other fronts.
The Labor Department reported initial claims for unemployment benefits fell 9,000 last week to 363,000. However, the less volatile four-week average of jobless claims was down only 1,000.
The federal government said construction spending edged 0.6 percent higher in September, as stronger residential construction activity offset decreases in nonresidential and government projects.
"The housing recovery is gaining some momentum," said IHS Global Insight economist Nigel Gault. "Consumers and the housing market are offsetting some of the drag we're getting from exports and business spending."
Chain store sales rose 4.4 percent in October after disappointing September results, according to the International Council of Shopping Centers. The development prompted some economists to brighten their outlook for the all-important Christmas shopping season.
The Institute for Supply Management's monthly index edged up enough to convince economist Dan Meckstroth of the Manufacturers Alliance for Productivity and Innovation "that manufacturing is growing again, albeit at a slow rate, and not slipping back into recession." The slight improvement was buoyed by stronger orders from domestic customers. Export orders declined.
Chrysler, Toyota and Volkswagen reported double-digit sales increases in October. Honda posted a 9 percent increase while General Motors said sales rose 5 percent. Sales rose slightly at Ford.
The auto industry hit bottom in 2009 when 10.4 million cars and light trucks were sold, according to the National Automobile Dealers Association. Sales are expected to top 14 million this year. That is a healthy increase over the 12.7 million vehicles sold last year, but well below average annual sales of 15.4 million between 2000 and 2010, the industry group reported.
The Labor Department said Thursday productivity rose 1.9 percent in the third quarter, as companies were able to produce more goods without increasing employment proportionately. But the hourly pay of workers fell 0.4 percent during the quarter and is up a mere 0.9 percent from last year, the agency said.
Investors gleaned enough good news from the various reports to send major Wall Street indexes up 1 percent or more.
The Standard & Poor's 500, a broad measure of the stock market's health, advanced 15.43 to close at 1,427.59. It is up 13.5 percent this year. The Dow Jones industrial average climbed 136.16 to finish at 13,232.62, leaving it up 8.3 percent for the year. The Nasdaq index closed at 3,020.061, up 42.827 for the day and ahead 15.9 percent for the year.
While closely tracked by economists, the data reported Thursday will not resonate among voters the way the Labor Department's unemployment report, due out this morning, will.
Mr. Hoffman and Mr. Gault forecast that the October jobless rate will come in at 7.9 percent. That's slightly higher than the 7.8 percent reported for September, which was an unexpectedly large drop that took many by surprise. Mr. Hoffman expects the report will show 140,000 jobs were added last month.
A surprise on the unemployment report would provide ammunition to Democratic President Barack Obama or Republican challenger Mitt Romney as they head into the last weekend of campaigning in a tight presidential race.
Persistently high unemployment and weak income growth could dampen chances for Mr. Obama's reelection, according to Mr. Gault. The jobless rate averaged 8.1 percent in the third quarter and incomes grew less than 1 percent over the same period, he said.
Since World War II, no incumbent has been reelected when those two numbers were so poor, Mr. Gault said. But he said voters may take into account the fact that none of the sitting presidents who went down to defeat -- Gerald Ford, Jimmy Carter and George H.W. Bush -- inherited an economy that was spiralling down into recession the way it was when Mr. Obama was elected in November 2008.
"He may well be judged less harshly on the economy than those previous presidents were," Mr. Gault said.
Mr. Hoffman said Thursday reports indicate the economy is improving modestly, improvements he expects will continue no matter who is elected.
First Published November 2, 2012 12:00 am