US economy hobbles toward brighter 2011
WASHINGTON – Fresh data on Thursday showed the US economy limping toward the end of 2010, its fitness much improved in the last year, but with the recovery still hobbled by high unemployment.
When President Barack Obama gave an end-of-year press conference on Wednesday, he insisted the world’s largest economy had passed “the crisis point.”
A slew of unemployment, inflation, consumer spending and factory data on Thursday appeared to back up that assessment, but it also highlighted that there is still considerable room for improvement.
Throughout the last year, new weekly unemployment claims which indicate the number of Americans who turn to the government for aid have banded between 400,000 and 500,000 — too high to signal falling unemployment.
Last week, the new claims — an important indicator of the vital jobs market — were at the bottom of that range, at 410,000, boding well for 2011, according to experts.
“The pace of labor market improvement is picking up,” said Nicholas Tenev of Barclays Capital.
And those who are in work appear to be spending a bit more.
The Department of Commerce reported Thursday that consumer spending increased in November by 43.3 billion dollars from the previous month, up 0.4 percent for the fifth consecutive month of gains.
The rise came in tandem with a 0.3 percent jump in personal income.
Economists closely watch the monthly reading on consumer spending, which accounts for roughly 70 percent of the nation’s output.
“Consumers are making a comeback,” said Chris Christopher of IHS Global Insight.
“Heavy discounting by retailers, relatively good employment numbers, an increasing stock market, easing of credit conditions, and higher disposable income are spurring a spending spree and increased consumer confidence,” he added.
Higher spending in the run up to Christmas is good news for retailers, who have struggled against high unemployment and Americans saving more than before the crisis.
Separate figures released on Thursday showed the manufacturing sector, which has led the economic rebound, continued to grow.
Although factory orders fell for a second straight month in November, that was largely due to a drop in volatile civil aviation orders.
Excluding the transport sector, orders rose 2.4 percent, more than three times stronger than expected.
“The gains last month were diffuse, taking place in every industry outside of transportation, ranging from metals, to machinery, to electrical equipment, to computers and communications equipment,” said David Huether, chief economist for the National Association of Manufacturers.
“Today’s report is a hopeful sign that manufacturing will continue to lead the economic recovery.”
But the outlook for 2011 is far from rosy across the board.
The housing market, which was at the epicenter of the recession, continues to be moribund.
Sales of new homes rose 5.5 percent in November, but “that is not saying a whole lot,” explained Joel Naroff, of Naroff Economic Advisors.
“The October level was the second lowest level since the data began to be collected in January 1963, so the November sales pace is still atrocious.”
With buyers still not incited by rock-bottom mortgage rates and a large inventory of low-priced homes, many economists fear the housing market may not yet have bottomed out.
But there are high hopes that other sectors can lead the way, helped by the Federal Reserve’s decision to inject 600 billion dollars into the markets and a massive tax cut extension can catapult the economy back to full health.
“Sentiment on US growth is clearly improving and for good reasons,” said Jens Nordvig, a currency analyst with Nomura Securities.