US economy starts strong in 2012

WASHINGTON — The U.S. economy is off to a fast start in 2012. The outlook for hiring is improving now that unemployment benefit applications are near a four-year low.

WASHINGTON — The U.S. economy is off to a fast start in 2012.

The outlook for hiring is improving now that unemployment benefit applications are near a four-year low. Inflation is tame, business travel is rising and the depressed housing market is showing signs of improvement after three dismal years.

That’s the picture shaped by a flurry of data Thursday. And it follows other reports showing the economy started the year with vitality. Companies are hiring more workers, consumer confidence is up, factories are cranking out more goods and bank lending is on the rise.

Economists are optimistic. But they caution that it is too early to say the recovery is accelerating.

“There’s no doubt that the economy is getting better, we just shouldn’t get carried away,” Mark Vitner, an economist at Wells Fargo, said. “We haven’t shifted into a higher gear.”

Even with six months of solid job growth, unemployment remains painfully high at 8.5 per cent. Inflation-adjusted wages fell over the past year. Housing continues to weigh on the economy. And a recession in Europe is expected to weaken growth in the U.S. and abroad.

Still, Thursday’s reports were encouraging:

— Fewer Americans sought unemployment benefits last week than at any time in nearly four years, the Labor Department said Thursday. Applications last week totalled just 352,000 after the biggest seasonally adjusted drop in more than six years.

The four-week average, which smooths out fluctuations, dropped to 379,000, the second-lowest such figure in more than three years. When weekly applications fall consistently below 375,000, it usually signals that hiring is strong enough to push down the unemployment rate.

— Manufacturing expanded in the Northeast in January, according to surveys by the Federal Reserve banks of New York and Philadelphia. That follows a report from the Fed that said factory output across the country surged in December by the most in a year.

— Inflation appears to be peaking after rising steeply last year. Consumer prices were unchanged in December, in part because gas is cheaper. Lower inflation gives consumers more spending power and allows the Fed more leeway to keep interest rates low.

— Total spending on business travel rose 7.6 per cent last year, the Global Business Travel Association said last week. That helps companies like Southwest Airlines, which reported higher fourth-quarter profit and revenue.

— Union Pacific Corp., the largest U.S. rail operator, says it transported more cars, oil, industrial parts and chemicals in the final quarter of last year. CEO Jim Young predicted “slow but steady economic growth in 2012.”

— JPMorgan Chase, the nation’s largest bank, said its lending to businesses rose 12 per cent in the October-December quarter compared to the same period a year earlier. Tight credit has been a major reason why smaller businesses have been unable to expand and hire more workers.

A recovery hinges on strong job growth. Hiring was solid in the final six months of last year, capped by December’s net increase of 200,000 jobs.

Still, the job market has a long way to go before it fully recovers from the damage of the Great Recession, which wiped out 8.7 million jobs. More than 13 million people remain unemployed. Millions more have given up looking for work and so are no longer counted as unemployed.

And wages aren’t keeping up with inflation. The department said in a separate report Thursday that average inflation-adjusted hourly earnings dropped 0.9 per cent last year.

Without more jobs and higher pay, consumers might have to cut back on spending. That would weigh down growth next year. Consumer spending accounts for about 70 per cent of the economy.

Another major hurdle is housing. In December, builders ended their third straight year of dismal home construction. And 2011 was the worst on record for single-family home building, the Commerce Department said.

Still, signs of improvement surfaced toward the end of the year, when builders started more single-family homes in each of the last three months.

And the average rate on the 30-year mortgage fell to a record low of 3.88 per cent this week, according to Freddie Mac, the eighth record in the past year.

So far, low rates have done little to boost home sales. But a survey of homebuilders this week showed many are more optimistic about this year after seeing a rise in the number of people looking to buy.

“We expect further sustained gains in starts and permits over the next few months; a real recovery is getting started,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

———

AP Real Estate Writer Derek Kravitz contributed to this report.

Just Posted

Innisfail-Sylvan Lake MLA Devin Dreeshen received his COVID-19 vaccine Tuesday at Jackson’s Pharmacy in Innisfail. (Devin Creeshen Twitter photo)
COVID-19: Most local MLAs have received their first vaccine shot

Alberta’s NDP is encouraging all MLAs to get vaccinated and publicly promote… Continue reading

Alberta continues to wrestle with high COVID-19 case numbers. (NIAID-RML via AP)
Red Deer up to 858 active cases of COVID-19

Province reports additional 1,799 cases of the virus

Bo's Bar and Grill owner Brennen Wowk said the hospitality industry is looking for more clarity from the province around what conditions must be met to allow for restaurants reopening.
(Advocate file photo)
Frustated restaurant owners want to know government’s reopening plan

Restaurant owners feel they are in lockdown limbo

The Bowden Institution medium security facility near Bowden has 15 active COVID-19 cases. (THE CANADIAN PRESS/Jeff McIntosh)
15 active COVID-19 cases at Bowden prison

Bowden Institution has had 36 positive cases this year with 21 recovered and no deaths

Red Deer Mayor Tara Veer and several members of city council helped kick off the spring Green Deer cleanup campaign on Wednesday. Veer said city workers do their best to keep the city looking good, but need volunteer help to get rid of litter that has blown into bushes onto road sides over the winter. (Photo by LANA MICHELIN/Advocate staff)
Red Deer city councillors launch spring Green Deer campaign

Volunteers are needed to keep the city looking good

Hassan Diab holds a news conference on Parliament Hill, in Ottawa Friday, February 7 , 2020.  THE CANADIAN PRESS/Fred Chartrand
Canada must not extradite Diab regardless of coming French court decision: lawyer

Canada must not extradite Diab regardless of coming French court decision: lawyer

Vancouver mayor-elect Kennedy Stewart addresses supporters in Vancouver on Sunday, Oct. 21, 2018. Vancouver's mayor says he understands that some drug users aren't happy with the city's proposed model for decriminalization but time is of the essence and the details can be worked out later. THE CANADIAN PRESS/Darryl Dyck
Vancouver mayor says there’s no time for drug decriminalization redo

Vancouver mayor says there’s no time for drug decriminalization redo

The RCMP logo is seen outside Royal Canadian Mounted Police "E" Division Headquarters, in Surrey, B.C., on Friday, April 13, 2018. THE CANADIAN PRESS/Darryl Dyck
Saskatchewan Mountie charged with first-degree murder after man found dead in woods

Saskatchewan Mountie charged with first-degree murder after man found dead in woods

Garneau quarantine travel to Iceland raises government confusion over rules

Garneau quarantine travel to Iceland raises government confusion over rules

Bloc Quebecois Leader Yves-Francois Blanchet rises during question period in the House of Commons on Parliament Hill in Ottawa on Wednesday, May 12, 2021. After repeatedly voting non-confidence in the minority Liberal government, the Bloc Quebecois is now calling on the government to do everything possible to avoid an election during the COVID-19 pandemic. THE CANADIAN PRESS/Sean Kilpatrick
BQ calls on Liberals to avoid pandemic election, despite voting non-confidence

BQ calls on Liberals to avoid pandemic election, despite voting non-confidence

U.K. study says expect more reactions from mixing Pfizer and AstraZeneca vaccines

U.K. study says expect more reactions from mixing Pfizer and AstraZeneca vaccines

In this Monday, March 15, 2021 file photo a vial of AstraZeneca vaccine is pictured in a pharmacy in Boulogne Billancourt, outside Paris. Questions remained Wednesday about the future of the Oxford-AstraZeneca vaccine in Canada, as Manitoba limited use of the shot and Ontario announced it planned to save an incoming shipment to use as second doses.  THE CANADIAN PRESS/AP/Christophe Ena, File
Questions remain about the future of the Oxford-AstraZeneca shot in Canada

Questions remain about the future of the Oxford-AstraZeneca shot in Canada

Singer Celine Dion performs during her first World Tour show called Courage Wednesday, September 18, 2019 at the Videotron Centre in Quebec City. THE CANADIAN PRESS/Jacques Boissinot
Songbird Uncaged: Celine Dion readies return to Las Vegas stage for 10-date run

Songbird Uncaged: Celine Dion readies return to Las Vegas stage for 10-date run

Most Read