Cooling US labor market takes a toll on confidence

Employment application Employment application

April 26 (Bloomberg) -- More Americans than forecast filed applications for unemployment benefits last week and consumer confidence declined by the most in a year, signaling that a cooling labor market may restrain household spending.

Jobless claims fell to 388,000 from a revised 389,000 the prior week that was the highest since early January, Labor Department figures showed today in Washington. The Bloomberg Consumer Comfort Index declined to minus 35.8 from minus 31.4 the previous week.

“There has been some slowdown in the labor market,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York, who correctly projected the level of jobless claims. “That makes consumers feel less confident, and makes them more cautious about their spending. We could see some weakness in April payrolls.”

Fewer firings are needed to lay the groundwork for more hiring and support consumer demand, which makes up 70% of the economy. Another report today showed that signed contracts to buy homes rose more than forecast in March, more evidence of a stabilizing housing market that may boost confidence.

Stocks climbed for a third day after the housing data. The Standard & Poor’s 500 Index rose 0.2% to 1,392.8 at 12:09 p.m. in New York. The yield on the benchmark 10-year Treasury note fell to 1.94% from 1.98% late yesterday.

Confidence is also slipping in the euro region, a report today showed.

Europe Index

An index of executive and consumer sentiment in the 17-nation euro area fell to 92.8 from a revised 94.5 in March, the European Commission in Brussels said today. Economists had forecast a drop to 94.2 from a previously reported 94.4, the median of 29 estimates in a Bloomberg News survey showed.

U.S. jobless claims were forecast to decline to 375,000, according to the median of 48 estimates in a Bloomberg News survey of economists. The Labor Department revised the previous week’s figure from 386,000. Claims in the week ended April 14 were the highest since Jan. 7.

Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates.

Among companies cutting positions is AMR Corp.’s American Airlines, which said last week it will eliminate 1,200 airport agent, baggage and cargo jobs. The cuts come as part of a bankruptcy restructuring plan to trim annual labor spending by $1.25 billion.

CSX Corp., the biggest U.S. eastern railroad, is hiring people mainly to keep headcount stable.


“Last year, you may recall we hired 4,000 people -- roughly 3,000 was attrition, the other 1,000 was evenly split between train and engine crews to move the products” and others to install safety systems to comply with regulations, Michael Ward, chief executive officer at CSX, said in an April 18 interview. “So those people were hired. This year the 3,000 will be largely attrition.”

A report from the Labor Department on April 6 showed hiring cooled in March. Employers added 120,000 jobs, the fewest in five months. The jobless rate fell to 8.2% from 8.3% the prior month.

The figures help explain why Federal Reserve policy makers yesterday stuck to a plan to hold borrowing costs close to zero through 2014. Central bankers said that while labor-market conditions have improved, unemployment “remains elevated.”

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