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US consumer sentiment up as unemployment plunges

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Consumer comfort climbed has climbed in the US

Data on jobless claims yesterday confirmed what US consumers have been saying for the past three months: a strengthening job market is making Americans more confident.

The number of applications for unemployment benefits plunged by 43,000 to 265,000 in the week ended January 24, the fewest since April 2000, according to the Labour Department.

The Bloomberg index of consumer comfort climbed in the seven-day period ended January 25 to the highest level since July 2007.

The slump in claims, while probably overstated by seasonal fluctuations, helps ease concern that firings were inching up as companies fretted over slowing global growth. The confidence figures are the latest to show American households could potentially help the US power past events abroad as falling petrol prices and the lowest unemployment rate since mid-2008 propel spending.

"The labour market's in good shape going into 2015 and looks like it will be in good shape for the rest of the year," said Guy Berger, an economist at RBS Securities in Stamford, Connecticut, who projected a drop to 280,000.

"There's nothing wrong and almost everything right with the economy right now."

Stocks fluctuated between gains and losses as investors scrutinised earnings amid concern over how plunging oil and a stronger dollar will affect corporate profits.

The one blemish yesterday was an unexpected drop in pending home sales. Contracts to purchase previously owned houses fell 3.7pc in December, the most in a year, according to figures from the National Association of Realtors.

The median forecast of 42 economists surveyed by Bloomberg called a 0.5pc increase.

"Total inventory fell in December for the first time in 16 months, resulting in fewer choices for buyers and a modest uptick in price growth," said Lawrence Yun, the NAR's chief economist.

"More jobs, increasing consumer confidence, less expensive mortgage insurance and new low down-payment programmes coming into the marketplace will likely lead to more demand from first-time buyers."

Figures on jobless claims often see-saw around this time of year as the holidays make it difficult to adjust the data for seasonal variations. For example, last week the Martin Luther King public holiday shortened the workweek, giving government staff less time to crunch the numbers, a Labour Department spokesman said as the data were released to the press.

The drop brought a resounding halt to an acceleration thattook claims to a seven-month high in early January.

Irish Independent