The biggest two-month drop in the jobless rate since 1958 may be helping lift households’ spirits, boosting the odds that spending, which accounts for about 70 percent of the economy, will keep growing. Higher gasoline prices will remain a hurdle as political tensions in oil-exporting countries push up the cost of crude.
Improving sentiment “may give consumers the shot in the arm they need to step up spending,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Rising gasoline prices will impact the index with a lag. Consumers will be forced to adjust spending patterns.”
Less unemployment, a growing economy and increases in stocks are helping offset negative forces, including higher fuel costs and a troubled housing market, said Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg. Readings of minus 40 have historically been the threshold indicating Americans think a recovery from recession has begun, he said.
The index’s gain is “a significant advance in its struggle to return to levels associated with economic growth,” Langer said in a statement. “There are still miles to go.”
The four-point gain last week follows a five-point increase in early January. The gauge dropped five points in the week ended Feb. 6, the biggest setback since January 2010.
Movements of that magnitude are unusual because the index is based on a four-week average, Langer said. Nonetheless, the gauge is mimicking the shifts seen in a 10-week span in mid-1993, when the economy was also recovering from a recession.
The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers aged 18 and over.
Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; the percentage of negative responses is subtracted from the share of positive views and divided by three.
The share of households with a positive view of the economy rose to 15 percent, the most since September 2008, from 14 percent the prior week. Those saying it was a good time to buy needed items rose to 27 percent, compared with 25 percent the previous week.
Macy’s Inc., the second-biggest U.S. department-store chain, is among companies counting on shoppers to keep spending. The Cincinnati-based retailer this week reported earnings that beat analysts’ estimates as it controlled costs and sold exclusive holiday gifts.
“We are entering the year with building momentum, which gives us confidence that we should have another strong year,” Karen Hoguet, chief financial officer, said on a conference call with investors on Feb. 22.
Women registered the sharpest advance in confidence last week, gaining 8.5 points, the biggest increase since July 2007, to minus 42.6. The reading for men was little changed.
Survey respondents’ views varied sharply based on income levels, today’s report showed. The index for Americans earning less than $15,000 a year was at minus 68.6 last week, compared with minus 76.6 the week before. For those making more than $100,000, the index improved to minus 0.3 from minus 4.6.
Confidence improved to minus 24.5 among those holding a full-time job, compared with minus 52.1 for part-timers.
Fewer Americans filed applications for unemployment insurance payments last week, figures from the Labor Department showed today. The number of claims decreased to 391,000 from 413,000 the prior week.
Gasoline prices and the comfort index have moved in the same direction 98 percent of the time since 2004, according to calculations by Bloomberg’s Brusuelas. Changes in the four-week average of claims for jobless benefits have been in sync with the comfort gauge about 72 percent of the time.
The comfort index can range from 100, indicating every participant in the survey had a positive response to all three components, to minus 100, signaling all views were negative. The margin of error is 3 percentage points.
