Steadily Dropping Jobless Claims Signal Optimism Ahead Of Fiscal Cliff

Recently-released government data indicates that U.S. jobless claims have been dropping for weeks, and this improvement combined with robust retail sales data paints a picture of economic optimism ahead of the looming fiscal cliff.

Falling Jobless Claims 

Data

Recently-released government data indicates that U.S. jobless claims have been dropping for weeks, and this improvement combined with robust retail sales data paints a picture of economic optimism ahead of the looming fiscal cliff.

Falling Jobless Claims 

Data provided in a Labor Department report released on December 13 indicates that the number of initial applications for unemployment benefits was 343,000 during the week ending December 8, which was 29,000 less than the 372,000 claims made during the prior period.

This week was the fourth in a row where these jobless applications declined, and represented the second-lowest figure for any period in 2012. The Los Angeles Times reports that the number of jobless claims during the week ending December 8 fell far more from the previous period than expected by economists.

Retail Sales 

Data provided by the U.S. Department of Commerce reveals that retail sales increased 0.3 percent in November from the month before as consumers boosted their purchases of items such as cars and electronics. The total estimated figure for U.S. retail and food services sales was $412.4 billion during the month, which was 3.7 percent higher than the same period in 2011.

The report provided by the government agency includes sales made during Black Friday, and the data reveals that during the period between September and November of this year, total sales were 4.3 percent higher than during the three-month period in 2011.

Economic Strength 

The combined factors of both steadily falling jobless claims along with recently-released and previously-published data indicating strong retail sales data indicate that the U.S. economy is holding up ahead of the more than $600 billion worth of tax increases and spending cuts that will be triggered on January 1 if Washington lawmakers cannot resolve their budget differences.

The potential for these major changes to fiscal policy have frequently been cited as potentially creating major headwinds for the U.S. economy, and the Congressional Budget Office has predicted earlier in the year that the budget changes would push the nation into recession in 2013.

Improving Labor Market 

Even though these potential economic headwinds have created significant uncertainty for employers, there is evidence that the nation's labor market is steadily improving. In addition to the recent Labor Department reports indicating that jobless claims have dropped for the last four weeks in a row, the government agency indicated earlier in the month that the U.S. unemployment rate has fallen to 7.7 percent in November.

The nation bolstered payrolls by 146,000 during the month, and the recent fall in the jobless rate came after the nation had a jobless rates of 7.9 percent in October and 7.8 percent in September.

The Los Angeles Times reports that the number of jobless claims being filed is roughly in-line with its level before Hurricane Sandy happened in October. After this severe weather event, the number of initial applications for unemployment benefits surged to around 450,000 per week around mid-month.  Market experts have stated that weekly application figures of 350,000 coincide with robust jobs growth.

The most recent Labor Department report indicated that the four-week average fell to 381,500, down from the previous week's reading of 408,500. This figure, which contains data from more weeks, is considered by many market experts to be a less volatile indicator of the labor market.

In the current situation of robust retail sales and a steadily improving jobs market, what is your company doing to make the most of the existing environment?