Four-Year Low in U.S. Jobless Claims May Bolster Spending in 2012: Economy

Claims for jobless benefits last week dropped to the lowest level in almost four years, pointing to an improvement in the U.S. job market that may help bolster spending in the new year.
Applications (INJCJC) for unemployment insurance payments plunged by 50,000 to 352,000 in the week ended Jan. 14, less than forecast and the fewest since April 2008, according to data from the Labor Department issued today in Washington. Other reports showed consumer prices were little changed in December for a second month and builders started work on the most single-family houses in more than a year.
Jobless claims, which tend to be volatile week to week around holidays, have trended down over the past month, a sign employment may pick up after payrolls grew by 200,000 in December. Gains in incomes, combined with less inflation, will probably underpin household spending, which accounts for about 70 percent of the world’s largest economy.
“We’ve had fundamental improvement in the labor market in the past few months,” said Ellen Zentner, a senior economist at Nomura Securities International Inc. in New York. “Moderate inflation will certainly help households spend more in the face of slower wage growth.”
Stocks climbed on the drop in claims and as Bank of America Corp. showed a profit last quarter. The Standard & Poor’s 500 Index rose 0.5 percent to 1,314.5 at the close in New York. Treasury securities fell, sending the yield on the benchmark 10- year note up to 1.98 percent from 1.90 percent late yesterday.