Wealth, Jobs Data Support Upturn

The net worth of U.S. households hit a record in the fourth quarter, driven by rising home and stock prices. Worker productivity in the quarter was revised slightly lower, but unit labor costs shrank by less than expected and weekly initial unemployment claims also fell, according to government data released Thursday.

The reports reaffirmed forecasts that today’s widely awaited employment report would show a larger boost in jobs in February than in previous months. Slower productivity growth suggests that employers may need to increase hiring, as they aren’t squeezing as much output from existing workers, economists said.

The Federal Reserve’s quarterly “flow of funds” report showed that household net worth, which includes nonprofit organizations, jumped 5.1% to $44.41 trillion from $42.25 trillion in the third quarter. It was the fifth straight quarter the measure had increased. Household net worth is a measure of assets, such as houses and pensions, minus liabilities such as mortgages and credit card debt.

First-time applications for unemployment insurance benefits fell to 345,000 in the week ended Feb. 28 versus a revised 352,000 the previous week, the Labor Department said. Wall Street had predicted 345,000.

The latest reading continues the relative stability in the number of new claims, which has ranged from 339,000 to 368,000 since mid-December, suggesting that the pace of layoffs has steadied.

“With robust economic growth and improving business confidence, we expect to see accelerating employment gains in the months ahead,” Gary Bigg at Banc of America Securities told Reuters.

February’s employment report is expected to confirm this trend, with Wall Street forecasts for the creation of 125,000 net new nonfarm payroll jobs versus January’s 112,000.

The closely watched four-week average of initial claims, which smooths out weekly fluctuations and gives a better sense of underlying employment, fell to 352,250 from a revised 355,250 the week before.

The Labor Department also said nonfarm business productivity, or worker output per hour, increased at a 2.6% annual rate in the final three months of last year, versus an initially reported 2.7% increase. Wall Street had forecast the 2.6% gain, the lowest in a year.

Unit labor costs were unexpectedly revised to show only a 0.4% annualized decline in the fourth quarter, versus an initially reported 1.3% fall, possibly indicating that firms’ ability to contain labor costs was slipping as demand picked up. Wall Street had expected the measure to be revised to a 1.2% decline.

Fourth-quarter hourly compensation also was revised higher to an annualized 2.2% increase from a 1.3% rise.

The Commerce Department said new U.S. factory orders slipped by 0.5% in January, matching forecasts.