- The Washington Times - Friday, October 9, 2009

A double dose of good news on the economy gave Wall Street a lift Thursday as traders welcomed a big drop in initial jobless claims and the first year-over-year increase in retail sales in 14 months.

First-time claims for unemployment benefits fell last week to their lowest level since January, while chain-store sales in September posted their first increase since July 2008, providing more evidence that the economy is slowly emerging from its longest, deepest recession in seven decades.

Most major retailers reported better-than-expected sales in September, although in some cases that meant sales simply fell less than expected.

The Dow Jones Industrial Average gained 61.29 points Thursday to close at 9,786.87. The broad-based Standard & Poor’s 500-stock index climbed 7.90 points to finish the day at 1,065.48, while the tech-heavy Nasdaq Composite Index advanced 13.60 points to end the day at 2,123.93.

In the labor market, initial claims for jobless benefits declined by 33,000 to 521,000 last week, the Labor Department reported Thursday. The drop was the fourth in five weeks, and it more than offset the upwardly revised increase of 20,000 for the previous week. The four-week moving average, which smooths weekly fluctuations, declined by 9,000 to 540,000, the lowest level since November.

“This report reaffirms that the labor market contraction is easing from earlier in the year,” said Michael Bratus, an economic analyst at Moody’s Economy.com. Weekly initial claims have now declined 23 percent from their March peak of 674,000. “Although these steps are important,” Mr. Bratus said, “the labor market is still far from stability.”

Employers shed 263,000 jobs in September as the unemployment rate reached a 26-year high of 9.8 percent. Altogether, the U.S. economy has lost 7.2 million jobs since the recession began in December 2007. Moody’s Economy.com does not expect U.S. employment to return to its December 2007 peak level until 2012.

On the retail front, the International Council of Shopping Centers (ICSC) reported that same-store sales increased 0.1 percent at chain stores in September. That compared with a 1 percent decline a year ago, when the global financial meltdown erupted in the wake of the bankruptcy of Wall Street investment firm Lehman Brothers.

“Small as that gain was, it was the first year-over-year increase since July 2008 and marked a significant turning point for the industry,” said Michael P. Niemira, chief economist and director of research for ICSC, a trade group.

Late Labor Day and back-to-school shopping boosted retail sales last month. Discounters were among the biggest beneficiaries of the September sales surge. Same-store sales at BJ’s Wholesale Club Inc. jumped 5.5 percent compared to last year, and Costco Wholesale Corp.’s sales climbed 3 percent. Target’s sales fell 1.7 percent; Wal-Mart only reports quarterly sales data.

Several department stores registered smaller September sales declines than analysts expected. Beating expectations, Macy’s sales were down just 2.3 percent, and J.C. Penney’s posted a 1.4 percent drop. On the plus side, Kohl’s blew away a flat sales forecast with a 5.5 percent increase. Limited Inc. reported its first same-store sales increase since August 2007.

However, consumers are not likely to support a sustained resurgence in retail sales, analysts said.

“Despite the recession’s end, consumer fundamentals remain weak,” said Scott Hoyt of Moody’s. “Consumers remain in poor financial shape, with wealth well below its peak and credit difficult to obtain.” He expects household spending will be a drag on the economy into next year.

Buoyed by the government’s “cash for clunkers” program, auto sales by wholesalers surged 7.7 percent in August, the biggest gain since 1999, the Commerce Department reported Thursday in its wholesale trade report. Overall inventories at wholesalers declined 1.3 percent, the 12th monthly drop in a row.

“Auto inventories saw a big decline while sales shot up, a sign of ‘cash for clunkers’ and not true strength,” said Kim Whelan, an economic analyst at Wells Fargo Securities. “With the program over, the next few months could see major weakness” in auto sales.

Pointing to the overall decline in wholesale inventories, Ms. Whelan said, “Businesses remain extremely cautious.”

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