Economy Watch: Joblessness Drops to 9%; Retail Sales, Manufacturing Gain

A harsh winter fails to dampen consumer demand, as 28 major retail chains average a 4.7 percent year-over-year sales increase.

The nation’s unemployment rate slipped to 9 percent in January, a 0.4 percent decline from December, according to data released this morning by the U.S. Bureau of Labor Statistics. All told, the economy posted a modest net gain of 36,000 jobs for the month. Winners included the manufacturing and retail sectors, as construction, warehousing and transportation lost jobs.  The number of people unemployed dropped 600,000 to 13.9 million, the bureau reported.

Speaking on the eve of the report, Federal Reserve chairman Ben Bernanke asserted Thursday that the economy is recovering, except for the unemployment situation. That too will improve, he said–but slowly.

In an address at the National Press Club, Bernanke said that “recently… we have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold. Improving household and business confidence, accommodative monetary policy, and more-supportive financial conditions, including an apparent increase in the willingness of banks to make loans, seem likely to lead to a more rapid pace of economic recovery in 2011 than we saw last year.”

Optimistic indeed, but for one thing. “Even so, with output growth likely to be moderate for a while and with employers reportedly still reluctant to add to their payrolls, it will be several years before the unemployment rate has returned to a more normal level,” the chairman continued. “Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.” Perhaps a hint from the Fed chairman that recovery may not fully take hold until the third quarter.

Retail Sales Heat Up

It turns out that the various snowpocalypses and icetastrophes around the country have failed to dampen pent-up consumer demand after all. Retail sales continued their healthy upward trend in January, with 28 major chain stores posting an average 4.7 percent increase compared with January 2010, Thomson Reuters reported on Thursday.
Some retailers turned in surprising results. Limited Inc., parent of the Victoria’s Secret and Bath & Body Works brands, which reported a 24 percent spike in same-store sales this January compared with last. Sports chain Zumiez Inc. experienced a 15 percent rise in year-over-year sales, while Costco Wholesale Corp. saw 9 percent growth.

At the other end of the spectrum, clothier American Eagle Outfitters Inc. saw a 6 percent drop in sales compared with January 2010; Abercrombie & Fitch Co., reported a 4 percent drop; and Hot Topics experienced a 3.3 percent drop.

As it happens, this is the last monthly sales report for American Eagle, Abercrombie & Fitch and Aeropostale Inc., which will no longer release the information going forward. The companies offered no explanation, but a number of retailers have stopped reporting monthly sales since Wal-Mart did so in 2009, citing volatility in stock prices that follow sometimes volatile monthly sales figures.

ISM Non-Manufacturing Index Rises

The Institute for Supply Management said on Thursday that its Non-Manufacturing Index (NMI) tallied 59.4 percent in January, 2.3 percentage points higher than the seasonally adjusted 57.1 percent reported in December. According to the index, a score higher that 50 indicates growth.

Some 13 industries, all components of the index, reported growth in January, noted ISM. They included some expected industrials, such as retail–see above–and health care, but also real estate and construction. Less surprisingly, such industries as educational services and public administration contracted, squeezed by shrinking state and municipal revenues.

Wall Street dropped in the morning on Thursday, but bounced back into the black, with the Dow Jones Industrial Average ending up 20.29 points, or 0.17 percent. The S&P 500 gained 0.24 percent and the Nasdaq advanced 0.16 percent.