Hopeful consumers give economy a lift before election
Washington • A flurry of data issued Thursday sketched a brightening view of the U.S. economy in the final days before a presidential election that will pivot on the strength of the recovery.
Cheaper gas, rising home prices and lower unemployment have given consumers the confidence to spend more. And retailers, auto dealers and manufacturers are benefiting.
At the same time, many employers remain anxious about the economy, which is why only modest hiring gains are forecast for Friday's jobs report for October. It will be the last major report on the economy before Election Day.
Both presidential candidates pressed their arguments Thursday for why President Barack Obama's economic stewardship should or should not earn him another four-year term.
Economists think Friday's jobs report will show that the unemployment rate rose to 7.9 percent in October from 7.8 percent in September. Coming so close to the election, though, the most recent economic figures aren't expected to alter the outcome. Few voters are thought to still be undecided.
Here's what the reports issued Thursday showed about the state of the U.S. economy:
Consumers • Americans have taken heart from recent declines in the unemployment rate. They appear increasingly confident that the economy can sustain its modest recovery. That's translating into more consumer spending the fuel of U.S. economic growth even though businesses have pulled back and exports have slowed.
Consumer confidence jumped last month. The Conference Board index of confidence reached 72.2, its highest since February 2008, two months into the Great Recession.
The index is still below the level of 90 that's consistent with a healthy economy. But it's up from 40.9 a year ago the sharpest one-year increase since 1994, according to Robert Kavcic, an economist at BMO Capital Markets. And the index is far above its all-time low of 25.3 in February 2009, in the midst of the financial crisis.
Consumers are also spending more at retail stores, a separate report showed Thursday. Sales in stores open at least a year rose 5 percent in October, according to a tally from 21 retail chains by the International Council of Shopping Centers. Some of the increase, though, might reflect higher spending for generators, batteries, water and other supplies in preparation for Superstorm Sandy.
Jobs • Growth will likely remain modest. Most companies are reluctant to make major investments in hiring or equipment, economists say.
Economists have forecast that employers added 121,000 jobs last month too slow a hiring pace to drive down the unemployment rate quickly. The rate has declined in recent months in part because some people have given up looking for work.
Applications for unemployment benefits fell 9,000 to 363,000 last week, the Labor Department said Thursday. That level suggests that hiring is unlikely to pick up much from its current pace of about 150,000 jobs a month.
A report by payroll provider ADP showed that private companies added 158,000 jobs in October, up from 114,000 in September. ADP updated its methodology for the October report. It has frequently diverged sharply from the government's figures.
The U.S. economy expanded at a 2 percent annual pace in the July-September quarter, up from 1.3 percent in the second quarter. Most economists expect growth may slow a bit in the fourth quarter, partly because of disruptions from Superstorm Sandy.
Still, even at 2 percent annual growth, the economy is growing too slowly to bring rapid relief to roughly 12 million out-of-work Americans. With the unemployment rate still high, steady growth of more than 3 percent is generally needed to reduce it.
Auto sales • Americans are buying more big-ticket items, like cars and appliances. Auto companies reported steady sales gains last month despite losing three days of business to the storm in heavily populated areas of the Northeast.
Toyota said its sales rose nearly 16 percent for the month. Volkswagen reported a 22 percent jump. Honda's sales gained 8.8 percent. Chrysler's sales rose 10 percent, General Motors' 5 percent and Ford's less than 1 percent.
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