Wednesday, May 23, 2018
Business

Economy escaping funk of Hurricane Sandy

U.S. consumers shook off Hurricane Sandy last month and stepped up holiday shopping, helped by a steady job market and lower gas prices.

Retail sales rose 0.3 percent in November from October, reversing the previous month's decline. Sales increased mostly because Americans spent more online, bought more electronics and began to replace cars and rebuild after the storm.

And a sharp drop in gas prices lowered the overall increase. Excluding gas stations, retail sales rose a solid 0.8 percent, according to the Commerce Department report released Thursday.

Still, department store sales tumbled. And consumer confidence has slipped in recent weeks, which has raised concerns that some Americans may be growing worried about looming tax increases. That could dampen December sales. Many retailers depend on the two months of holiday shopping for roughly 40 percent of their annual revenue.

High unemployment and weak wage growth have kept consumers cautious about spending, which accounts for 70 percent of economic growth. Most economists expect just slim gains in consumer spending in the final three months of the year, which should keep growth weak.

"Despite the positive numbers today . . . we are not in a consumer-led recovery," said Chris Christopher, an economist at IHS Global Insight.

A Labor Department report suggested the job market is improving, which could set the stage for more spending next year.

Jobless claims drop: The number of Americans seeking unemployment benefits fell sharply for a fourth straight week, a sign that the job market may be improving.

The Labor Department said Thursday that weekly applications for unemployment benefits fell 29,000 last week to a seasonally adjusted 343,000, the lowest in two months. It is the second-lowest total this year.

Applications are a proxy for layoffs, so the drop indicates that companies are cutting fewer jobs. But employers also need to step up hiring to rapidly push down the unemployment rate.

The drop suggests that companies aren't laying off workers in advance of the "fiscal cliff," the package of tax increases and spending cuts set to take effect early next year.

"Worries about the fiscal cliff are not translating into any significant weakening in the labor market yet," said Jim O'Sullivan, an economist at High Frequency Economics. "Today's reading suggests net improvement, although it is just one week."

Applications spiked five weeks ago because of Hurricane Sandy. The storm's impact has now faded. The four-week average, a less volatile measure, fell 27,000 to 381,500.

Mortgage rates dip: Average U.S. rates on fixed mortgages fell this week to near record lows, providing more incentive for Americans to buy homes and refinance.

Mortgage buyer Freddie Mac said Thursday that the average 30-year loan rate dipped to 3.32 percent. That's below last week's rate of 3.34 percent. And it's just above the 3.31 percent, the lowest rate on records dating to 1971.

The average on the 15-year fixed mortgage declined to 2.66 percent from 2.67 percent last week. The record low is 2.63 percent.

The rate on the 30-year loan has remained below 4 percent all year, helping spark a modest housing recovery.

Sales of newly built and previously occupied homes are up from a year ago. Home prices have increased. And builders are more confident in the market.

Rising prices encourage more people to sell their homes. And they lead to more buying, in part because some start to worry prices could eventually rise further.

Lower mortgage rates also have persuaded more people to refinance. That typically leads to lower monthly mortgage payments and more spending.

Still, many people are unable to take advantage of the low rates, either because they can't qualify for stricter lending rules or they lack the money to meet larger down payment requirements.

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