Retail Sales Rebound, Jobless Claims Hit New 3-Month Low

Before you go, we thought you'd like these...
Retail Sales
Mark Lennihan/AP
By Lucia Mutikani

WASHINGTON -- U.S. retail sales rebounded in February and new applications for unemployment benefits hit a fresh three-month low last week, suggesting some strength in the economy after harsh weather abruptly slowed activity in recent months.

The Commerce Department said Thursday retail sales increased 0.3 percent last month as receipts rose in most categories. That followed a revised 0.6 percent drop in January and ended two straight months of declines.

"The consumer appears to be back in the game," said Millan Mulraine, deputy chief economist at TD Securities in New York.

"We see this as further confirmation that the underlying momentum in the economy remains quite favorable, and we look for further upside spending momentum in the coming months."

Economists polled by Reuters had forecast retail sales rising 0.2 percent in February.

U.S. stock index futures extended gains after the data. The dollar trimmed losses against the yen.

An unusually cold and snowy winter disrupted economic activity at the end of 2013 and the beginning of this year. Economists had expected only a marginal increase in retail sales in February after snow and ice blanketed densely populated regions during the first half of the month.

In a separate report, the Labor Department said initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 315,000.

That was the lowest reading since late November. Economists had forecast first-time applications for jobless benefits rising to 330,000 in the week ended March 8.

The four-week moving average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, fell to its lowest level since early December.

"There is certainly no sign of weakening, adding to the evidence that recent slowing in payrolls is weather-related and temporary," %VIRTUAL-article-sponsoredlinks%said Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, N.Y.

Harsh weather has hurt job growth, but the labor market is starting to break out of winter's grip. Nonfarm payrolls increased 175,000 in February.

Retail sales are expected to accelerate in the spring as warmer temperatures and improving household finances help to unleash pent-up demand.

Rising homes values and share market prices, as well as some uptick in wages, have left household balance sheets in much better shape since the recovery started nearly five years ago.

So-called core sales, which strip out automobiles, gasoline, building materials and food services, and correspond most closely with the consumer spending component of gross domestic product, rose 0.3 percent in February.

That followed a revised 0.6 percent decline in January.

Consumer spending rose at a 2.6 percent annual pace in the fourth-quarter of 2013 and is expected to slow somewhat in the first three months of this year.

Retail sales last month were supported by a 0.3 percent rise in receipts at automobile and parts dealers. That helped to offset a 0.2 percent drop in sales at electronics and appliance stores.

Receipts at building materials and garden equipment stores increased 0.3 percent, likely as consumers bought snow removal equipment. Sales there had risen 1.4 percent in January.

Sales at furniture stores rose as did receipts at clothing stores. There were also gains in receipts at sporting goods shops and restaurants and at nonstore retailers. Sales at food and beverage stores, however, fell.

Retail Sales Rebound, Jobless Claims Hit New 3-Month Low
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION
Read Full Story

People are Reading