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The Badger Herald

Independent Student Newspaper Since 1969

The Badger Herald

Independent Student Newspaper Since 1969

The Badger Herald


Jobless claims fall, but retail sales slow

WASHINGTON (REUTERS) — Shorter unemployment-aid lines were not enough to convince analysts Thursday the U.S. labor picture was improving, while anemic September sales reported by American retailers fanned consumer-spending fears.

The Labor Department said Thursday that the number of Americans signing up for state unemployment aid fell by 40,000 last week to a seasonally adjusted 384,000.

While last week’s drop in claims was bigger than expected, the four-week average — regarded as a more reliable gauge of employment conditions — hovered above the 400,000 level that analysts regard as a sign the job market is still floundering.

“I have mixed emotions. You need to see one or two more weeks of below-400,000 numbers before you can say things have gotten better or stopped deteriorating,” said Steve Ricchiuto, chief U.S. economist at ABN AMRO.

Overall, the numbers did little to sway analysts from their view that the labor market is unlikely to show significant improvement until next year, and negative news from the retail sector front reinforced concerns about the economic recovery.

A sluggish recovery, battered stock market and fast-eroding consumer confidence drove down sales at U.S. retailers last month, retailers said Thursday.

Stock markets, hammered to multi-year lows over the past several weeks, turned a blind eye to those fears, and staged a sharp rebound.

The blue-chip Dow Jones industrial average surged nearly 248 points, or 3.4 percent, after briefly touching a new five-year low while the Nasdaq composite soared more than 49 points, or 4.4 percent, by the close.

However, retailers are likely to suffer from more than just consumer caution.

Analysts are now wary that it could take several weeks — potentially spilling into the crucial holiday shopping season — before retailers and manufacturers are able to unravel the backlog from a 10-day closure at U.S. West Coast ports that stranded billions of dollars’ worth of goods.

According to the latest chain-store sales data, discounters generally outperformed department stores in September, but not all were immune to the bumps of the economic recovery.

For instance, value-priced retailer Kohl’s Corp. reported a drop in sales at stores open at least one year, breaking a streak of stellar results.

Warehouse store chain BJ’s Wholesale Club Inc. slashed its outlook for the six months ending in January, citing economic uncertainty and waning consumer confidence.

And while Wal-Mart Stores Inc., the world’s largest retailer, maintained its outlook for the October quarter and year ending in January, it forecast only a modest rise of 2 to 4 percent in October sales at stores open at least one year.

“It was dismal across the board, with very, very few exceptions,” said Kurt Barnard, publisher of Barnard’s Retail Trend Report. “The numbers reflect deep concern, almost to the point of fear, on the part of the American consumer.”

Friday’s retail sales report should be the subject of close scrutiny from analysts and Federal Reserve officials trying to discern the path of the uneven economic recovery. Sales at U.S. retailers are expected to have fallen 0.9 percent in September, according to analysts polled by Reuters, but are seen inching up 0.1 percent when auto sales are stripped out.

Thursday’s economic news may not have been unambiguously upbeat, but the drop in jobless claims and the rise of stocks spelled trouble for debt markets, which sank.

Bill Cheney, chief economist at John Hancock Financial Services, said he was pleased with the fall in claims, while cautioning that the labor picture was still murky.

“It’s a little bit of reassurance that perhaps the jobs market isn’t as bad as people were telling,” he said.

However, most analysts cautioned not to read too much into last week’s big drop in jobless claims, attributing much of the falloff to the department’s statistical methodology.

“It’s a seasonal adjustment problem and we expect claims to bounce back to around 400,000 next week,” said Drew Matus, senior financial economist at Lehman Brothers.

Piling more pressure on the consumer, U.S. import prices in September rose by 0.7 percent, reflecting a huge gain in petroleum costs. So far this year, petroleum import prices have risen more than 60 percent, according to the Labor Department’s latest data.

That rise in petroleum, some analysts say, could help to erode consumer confidence and spending, which fuels two-thirds of economic growth.

“While there are few places where prices have been consistently rising, the surge in oil costs has to be taking its toll on consumer spendable income,” said Joel Naroff, of Naroff Economic Advisors in Holland, Pa.

He added that while the U.S. dollar’s strength over the long term had helped to keep the costs of most imported products down, oil was still a major concern.

“The rise in energy costs is taking a steep bite out of discretionary income,” he said. “With consumers becoming more conservative, this cannot help.”

Excluding volatile petroleum, import prices were up a more contained 0.2 percent.

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