The number of Americans filing new claims for unemployment benefits fell less than expected last week, but continued to point to strengthening labor market conditions.
Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 291,000 for the week ended Nov. 15, the Labor Department said on Thursday.
The labor market continues to tighten up. Last week’s JOLTs report told us that there is a commensurate increase in worker confidence, as quit rates and switches pick up as well. Wage growth has not arrived yet as the better employment conditions are pulling more people who were on the sidelines back into the labor pool. Once that process has finished playing out, average incomes will improve.
Now add in the elixir of plummeting gasoline and heating prices – a massive tax cut for half the country, which lives check to check and spends a fifth of their income on energy costs.
My guess is that the strength in holiday sales shock everyone. When people are more confident in their employment situation, they spend more money. That’s the real wealth effect in America – the one a rising stock market simply cannot produce.
Momentum is building. It’s slow now, but persistent and becoming more evident to more people with each passing day.