Superstorm drives up jobless claims
Superstorm Sandy drove new claims for US jobless benefits to a one-year high last week, a sign the deadly storm could hold back economic growth by leaving tens of thousands of people temporarily out of work.
Initial claims for state unemployment benefits rose 78,000 to a seasonally adjusted 439,000, the Labor Department said. That was the highest level since April 2011 and well above the median forecast in a Reuters poll. It was also the biggest one-week increase in new claims since 2005.
"Stepping back from the storm distortions, the economy is growing at about 2 per cent," said Ryan Sweet, senior economist at Moody's Analytics in Pennsylvania. "We will likely see a step back in job growth ... because of Sandy. The economy is just muddling along."
An analyst from the Labor Department said several states from the mid-Atlantic and Northeast reported large increases in claims due to Sandy, a mammoth storm that slammed into the East Coast in late October.
The storm left millions of homes and businesses without electricity, shut down public transportation and caused widespread damage in costal communities. However, the economic impact of the storm is likely to be temporary.
Economists expect the storm could shave as much as half a percentage point from economic growth in the last three months of the year, but should be made up early next year.
Retail sales data yesterday pointed to a softening in US consumer spending early in the fourth quarter as Sandy slammed the brakes on car purchases last month.
The four-week moving average for jobless claims, which smooths out volatility, rose 11,750 to 383,750. Economists generally think a reading below 400,000 points to an increase in employment.
Dow and S&P index futures turned negative after the data, while US Treasury debt cut early price losses. The dollar pared losses against the euro and pared gains against the yen.
A separate report showed US consumer prices edged higher last month as the cost of shelter jumped by the most in over four years, while fuel prices fell.
The Consumer Price Index increased 0.1 per cent last month, in line with analysts' expectations, data from the Labor Department showed.
The data pointed to only modest inflation pressures that appear unlikely to derail the US Federal Reserve's plan to keep interest rates low for an extended period.
"I wouldn't say that core CPI is worrying at all," said David Sloan, an economist at 4Cast in New York.
Prices for shelter, which include rent, rose 0.3 per cent during the month, the most since 2008, and accounted for over half of the overall increase in the CPI. That could be a hopeful sign for the economy if it is because landlords felt they have more leverage to raise rents. Rents for primary residences rose 0.4 per cent.
Fuel prices fell 0.6 per cent in October after climbing 7 per cent the prior month. That was the first drop in fuel prices since June. Higher costs at the pump have forced many American consumers to cut back on other spending.
A measure of underlying inflation was relatively muted. The core CPI, which excludes food and energy prices, increased 0.2 per cent.
In the 12 months to October overall consumer prices increased 2.2 per cent, up a tenth of a point from September's reading. Core prices rose 2 per cent in the year through October.
Most economists don't see inflation threatening the economy in the short or long term.
A gauge of manufacturing in New York state showed that activity slowed in November for a fourth straight month, the New York Federal Reserve said.
Despite the decline, new orders rose, the first positive reading for the forward-looking component index since June.
The survey of manufacturing plants in the state is one of the earliest monthly guideposts to US factory conditions.