Jobs are to U.S. consumers what hair was to Samson.
A surge in jobless claims Thursday adds more urgency to the already important payroll number, due out Friday. The median forecast is that April payrolls grew by a modest 185,000 jobs. The month-long rise in claims creates an asymmetric risk: the number could more likely disappoint rather than delight.
Most forecasts had expected U.S. labor markets to improve, perhaps even accelerate, in 2011. Stronger job markets, along with a tax cut, would help consumer spending power by creating a virtuous cycle of demand and job growth.
The recent rise in jobless claims raises questions about that outlook. If consumers don’t have jobs, they have no financial muscle for spending.
To be sure, the U.S. Labor Department was quick to explain Thursday’s unexpected 43,000 jump in end-April jobless claims, including (honestly) spring break in New York State schools.
But the increase in claims was not a one-week deal. New filings have been trending higher throughout April. They are back up to their highest level since August, perhaps signaling softer job markets in the second quarter.
U.S. consumers aren’t only the main engine of U.S. GDP growth. Their shopping supports the export machines of many emerging economies. The recent increase in commodity prices was predicated on the idea that stronger U.S. demand for all types of manufactured goods would increase the need for oil, cotton and metals.
If U.S. consumer spending doesn’t pick up in coming quarters from a ho-hum 2.7% annual rate in the first quarter, then both U.S. and global growth could be disappointing.
Don’t expect a turn in claims soon. In coming weeks, workers in the South left jobless by the tornadoes will file for benefits. While those claims were triggered by weather–not economic–forces, they still represent people who aren’t working full-time and thus not cashing full paychecks.
The end result is less income to support spending.
The drop in oil price–if sustained–will prove to be a big offset to the trend in jobless claims. The price of oil in the futures market plunged more than $7 Thursday morning, approaching $102 per barrel.
Rising gasoline prices have depressed U.S. consumers’ economic outlook and altered their spending plans. Thursday’s RBC consumer outlook report showed 47% of consumers had changed or cancelled their summer vacation plans because of pricier energy. If gas prices were to fall back, some of those vacation plans–which support tourism jobs–could be back on.
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