June 11th, 2014 11:45 AM by Nick Rapplean
Last week enjoyed a slate of optimistic economic headlines with unemployment, initial jobless claims and consumer credit all performing better than expected. Unemployment Last week saw encouraging news on the employment front, with the U.S. economy adding 217,000 jobs in May, slightly higher than the 215,000 additional jobs economists had expected. This kept the unemployment rate steady at a nearly six-year low of 6.3 percent, with 9.8 million Americans unemployed. May marked the fourth consecutive monthly gain of 200,000 or more jobs. That steady improvement enjoyed by the U.S. job market was notable, according to Ron Sanchez, executive vice president and chief investment officer at Fiduciary Trust. “That is the first time that we have seen four consecutive months of 200,000 or more since October of 1999,” Sanchez told Forbes. “For a number that has a high degree of variability, this is notable for its stability. And markets always like to see a true trend, and this would appear to be a well-entrenched trend.” Still, the job market is not out of the woods. The number of people unemployed for 27 weeks or longer in May was unchanged at 3.4 million, and comprised 34.6 percent of unemployed workers in May. The number of Americans involuntarily employed part-time because their hours had been cut or because that was the only work they could find was also unchanged at 7.3 million people. The labor force participation rate, which measures the number of working age Americans who are either employed or looking for work, was unchanged in May, at 62.8 percent, well below the pre-recession high of 66 percent. Initial Jobless Claims Turning to more recent employment figures, first-time claims filed for unemployment insurance by the newly unemployed were up, but were still hovering around a seven-year low, according to last week’s report from the Employment and Training Administration. Initial jobless claims filed during May grew 312,000, an 8,000-claim gain over the previous week’s revised total of increase 304,000, the Administration reported. This was the lowest total of new jobless claims since June 2, 2007’s total of 307,500. The four-week moving average, which is considered a more stable measure of new jobless claims, notched down by 2,250 claims to 310,250. The news was welcome, and pointed to continued economic growth, according to many experts, but many cautioned that while a drop in new jobless claims is good, they are one piece of a larger employment puzzle. “We need to see continued job growth,” Kathleen Bostjancic, Oxford Economics USA Inc.’s director of U.S. macro investor services, told the Bloomberg news service. “Rising wage growth is one of the missing keys here for the U.S. economy.” Consumer Credit Consumer borrowing benefited from bigger-than-unexpected gains in April with an equally unexpected increase credit card spending. Overall, consumer credit grew by a whopping 10.2 percent, reaching $3.17 trillion, according to last week’s release from the Federal Reserve. April’s $26.85-billion gain over March was considerably larger than the $15 billion analysts had predicted. Adding to the encouragement was the fact that credit card spending fueled April’s growth. Revolving debt, such as credit card spending, grew by a massive 12.3 percent, to reach $870.4 billion. Revolving debt, such as student and car loans, also enjoyed considerable growth, expanding 9.2 percent to reach $2.3 trillion. However, April’s credit card spending is critical as it indicates an increased willingness on the part of consumers to buy. Besides hinting at increased consumer confidence in at least near-term economic prospects, that consumer spending drives roughly two-thirds of the U.S. economy.