Initial jobless claims edged upward for the week ended December 24, to 381,000, just one week after posting the best weekly result since April 2008. This also marked the first time since last April that weekly claims had come in under 400,000 for four consecutive weeks.
Lower readings in recent weeks have helped pull the four-week average to 375,000, in a range where job creation is positive, but still more limited than would be ideal to bring the jobless rate down at a satisfying pace.
The jobs market is the backbone for consumers, and recent signs of improvement are providing a boost to consumer confidence. While the recent improvement in jobless claims and the drop in the unemployment rate in November were welcome developments, continued progress in the months ahead will be key to sustained improvement in the collective mood of consumers.
Personal income remains challenged, and the recent uptick in consumer spending was largely funded through reduced savings. Mediocre income growth appears likely to persist for some time, setting a practical speed limit for further growth in consumer spending without reverting to greater borrowing once again.
The recently passed two-month extension of the payroll tax cuts and emergency federal unemployment benefits should allow cash-strapped consumers to breathe easier at least temporarily. The issue will be back up for debate in short order, but politically, it will be difficult for either side to block another extension in an election year.
As we close the final chapter of 2011, what had been a sputtering economy has shown some moderate glimmers of hope. As we turn the page to 2012, the daunting question is whether or not that will continue.
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