Retail Sales Rise as Jobless Claims Drop : Economy: Government reports for January add to string of good news indicating that the recovery may be on track.
Americans carried the Christmas buying spirit into the new year, and the job market improved late in January, the government said Thursday, adding to a string of good-news economic reports.
Retail sales rose 0.3% to a seasonally adjusted $167.4 billion last month, the Commerce Department said.
That followed a gain of 0.8% in December and was the sixth rise in seven months. Department store and auto sales showed particular strength. Sales from November to December were 7.2% higher than a year earlier.
“This event is an excellent sign that the economy is pumping along on all cylinders. . . . If such a healthy rate of increase continues, the economy will not falter in 1993,” said economist William K. MacReynolds of the U.S. Chamber of Commerce.
Meanwhile, the Labor Department said the number of Americans filing first-time claims for jobless benefits fell by 12,000 to 340,000 during the week ended Jan. 30. It was the second consecutive decline and the lowest level of claims in five weeks.
The latest reports came as President Clinton put the final touches on an economic and budget package to create jobs this year and slash the deficit in half over the rest of his term.
Clinton appealed to business leaders at the White House to support the tax increases in the package, which will be formally presented to Congress next Wednesday.
Many Republicans are saying the economy no longer needs a short-term economic stimulus. Last week, the government reported that the unemployment rate had fallen to a one-year low of 7.1% in January, productivity growth last year was the best in two decades and factory orders in December rose at the fastest pace in 17 months.
However, two Nobel prize-winning economists--Robert Solow of the Massachusetts Institute of Technology and James Tobin of Yale University--told the Joint Economic Committee that, without a stimulus, the job market will improve only gradually.
“There is enough slack in the economy to warrant a more aggressive approach. The payoff would be higher output, more jobs, with little danger of inflationary pressures,” Solow said.
He said a stimulus package of $35 billion would reduce the current 7.1% unemployment rate to 6% in a year. Without the package, the rate would probably fall to about 6.5%, he said.
In advance of Thursday’s sales report, many economists were looking for a slightly better increase. Still, they were pleased that retail spending held up during a month in which consumers were coping with large credit card bills.
As long as the job market continues to improve, analysts expect consumer spending will also increase.
