Stronger job market could boost economy further
The healthier job market that's lifted the economy in recent months shows no signs of slowing.
Applications for unemployment aid nationally are near a four-year low, raising expectations of further hiring gains. The news Thursday helped catapult the Dow Jones industrial average to its highest close since May 2008.
More jobs and tame inflation are giving consumers more buying power. Their higher spending could further boost growth and lower the unemployment rate for February for a sixth straight month.
Even the troubled housing market is benefiting. Builders expect improved sales in the near future. In response, they're planning to break ground on more homes.
"The housing starts and unemployment claims numbers add to the belief that the economy is shifting gears," said Joel Naroff, president of Naroff Economic Advisers. "The decline in the unemployment rate is real, and it should continue."
A series of positive economic reports Thursday reinforced that message:
Weekly applications for unemployment benefits fell nationally to a seasonally adjusted 348,000, the Labor Department said. That's the lowest level since March 2008. Unemployment applications have dropped 11 percent in four months. In Utah, the number of first-time claims dropped by 179, to 2,082, according to the state Department of Workforce Services. The less volatile four-week average slipped by 273, to 2,312.
Builders broke ground in January on a seasonally adjusted annual rate of 699,000 homes, the Commerce Department said. That nearly matches November's three-year high. Single-family home construction cooled off slightly after a big jump in December.
Factory activity in the Philadelphia region grew in February at the fastest pace in five months, a survey by the Philadelphia Federal Reserve Bank found. That followed a report that showed a third straight month of factory growth in the New York region.
Wholesale prices were largely unchanged in January, Commerce said. While gas prices are rising, they've been offset by falling costs for electricity, home heating oil and natural gas. Most economists see inflation as little threat.
Many analysts are growing more optimistic about the job growth the government will report next month for February. Some say the net job gains could match or top January's. Employers added 243,000 net jobs in January, the most in nine months. In the past three months, the economy has produced an average of about 200,000 jobs.
Naroff said the unemployment rate, now at 8.3 percent, could drop below 8 percent by year's end.
An improving job market is crucial to the recovery. It boosts incomes, enabling consumers to spend more. Job growth has already helped boost car sales in the past three months.
If it continues, stronger hiring might also convince more people that it's a good time to buy a home a notion that many have resisted since the housing market went bust four years ago.
Single-family home construction rose over the final three months of 2011 to its highest level in a year and a half. The steady, if modest, gains have made builders more confident about their prospects than they've been in nearly five years.
Construction of single-family homes did slip in January. But builders requested permits for those homes at the fastest rate in a year. That shows that many anticipate more buyers over the next 12 months roughly the time it takes to build a single-family home once a permit is obtained.
Part of the rebound in home construction can be attributed to unusually warm winter weather. This January was the fourth-warmest in more than a century of record keeping.
But Rick Judson, a homebuilder in Charlotte, N.C., says the improved job market has made him more hopeful about 2012. He's already seeing more in interest from potential buyers.
"People are more willing to get out of their cubby holes and think about buying a home," said Judson, 61, who has owned his homebuilding company for nearly three decades. "When we see the job market stabilize, I think we're going to see a surge in home-buying."
Some economists still worry that Europe's financial crisis and rising gas prices could steal some momentum from the recovery. That's pretty much what happened last year, when the economy sputtered in early summer after beginning the year with solid job gains.
Gas prices have picked up in recent weeks. The average price for a gallon of gas was $3.52 Thursday. That's up 14 cents from a month earlier.
"January was a good month," Paul Ashworth, an economist at Capital Economics said. "But we have had good months before. The question is how resilient the economy is."
Tribune reporter Paul Beebe contributed to this story