Firing decline helps boost confidence in U.S.

Applications for unemployment benefits declined last week and Americans’ views of the economy were the brightest since early 2008 on the heels of a housing market recovery and higher stock prices.

Jobless claims fell 11,000 in the week ended June 1 to 346,000, the Labor Department said today in Washington. Sentiment about the state of the economy improved to the best level since January 2008, helping keep the Bloomberg Consumer Comfort Index at minus 29.7, close to a five-year high.

Waning dismissals, rising property values and higher stock prices this year will help underpin household spending and allow the economy to withstand budget cuts that are slowing growth this quarter. At the same time, the expansion would benefit more from bigger job and wage gains, and figures tomorrow are projected to show limited improvement in the pace of hiring.

“There’s some modest hiring taking place,” said Millan Mulraine, director of U.S. rates research at TD Securities USA LLC in New York, who projected 345,000 claims for last week. “Confidence is pointing to a fairly robust rebound in consumer activity.”

Stocks rose, with the Standard & Poor’s 500 Index erasing earlier losses to snap a two-day losing streak. The S&P 500 climbed 0.9% to 1,622.56 at the close in New York.

Equities fell as much as 0.7% earlier in the day after European Central Bank President Mario Draghi said the euro-area economy will return to growth by the end of the year, handing policy makers a reason to hold back fresh stimulus. He spoke after the ECB’s Governing Council left is main refinancing rate at 0.5% after reducing it by a quarter point last month.

German Economy

Ebbing overseas demand for American-made goods also helps explain why U.S. companies are limiting payroll growth. A report today showed German factory orders fell more in April than economists projected. Bookings, adjusted for seasonal swings and inflation, decreased 2.3%, the Economy Ministry in Berlin said.

Employers in the U.S. added 165,000 jobs for a second month in May, according to the median forecast in a Bloomberg survey before tomorrow’s Labor Department report. Jobless claims, which track weekly firings, need to fall before job growth, measured by the monthly payrolls report, can accelerate.

Household wealth in the U.S. jumped to a record in the first quarter, helping to explain gains in consumer confidence, another report showed today.

Net worth for households and non-profit groups increased by $3 trillion from January through March, or 4.5% from the previous three months, to $70.3 trillion, according to data from the Federal Reserve.

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