Gasoline that on May 3 reached $3.98 a gallon, its highest since July 2008, may prompt Americans to cut back on the spending that makes up 70 percent of the economy. The report also showed young adults and single Americans were among the groups losing the most confidence over the past two weeks.
“Surging gasoline prices and a difficult labor market are likely to dampen demand and serve as an impediment to growth in the second quarter,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Lower-income groups are caught in the vise of rising fuel costs and elevated unemployment.”
The survey period for the Bloomberg gauge was prior to news that the U.S. killed al-Qaeda leader Osama bin Laden. President Barack Obama’s approval rating surged after he said the FBI’s most-wanted terrorist was killed by U.S. Navy SEALs.
A New York Times/CBS News poll taken May 2-3 showed 57 percent of respondents said they approved of the president’s overall job performance, up from 46 percent last month. The good feelings failed to extend to the president’s handling of the economy, where his approval rating fell to the lowest level since he took office.
Another report today showed more Americans filed first-time claims for unemployment insurance payments last week, pushed up by auto-plant shutdowns and other unusual events that normal seasonal adjustments failed to take into account. Initial jobless claims surged by 43,000 to 474,000 in the week ended April 30, the most since August, according to Labor Department data.
A spring break holiday at schools in the state of New York prompted workers to file claims, which the seasonal adjustment factors didn’t expect last week, a Labor Department official said. In addition, Oregon began a new emergency benefits program for the long-term unemployed that also pulled in some new claimants, he said. Finally, auto-plant shutdowns due to parts shortages caused by the earthquake and tsunami in Japan also contributed to the increase, the official said.
Last week’s drop in the Bloomberg Consumer Comfort Index reflects deterioration in two of its three components. The buying-climate index decreased to minus 56, the second-lowest level since January 2010, from minus 51.8 the prior week. A gauge of Americans’ views of the economy at minus 75.8 was down from minus 74.3 the prior week.
The personal finances gauge was minus 6.9 last week, near the prior week’s minus 9.2 reading that was the lowest in two months.
Younger adults, those aged between 18 and 34, are the most pessimistic. An index of confidence for that age group fell to minus 51.3 last week, the lowest since October and down 21 points over the past two weeks. The measure for single Americans has also dropped 20 points over the same period.
“These are dreadful ratings by any measure,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. “Gas has soared by 29 percent this year alone, turning motoring into a painful experience for millions of Americans.”
The comfort index was higher among Democrats than Republicans for a third straight week, which has happened on just three previous occasions - in late 1996, April 2010 and at the start of this year. The comfort gauge among Democrats was minus 36.6, up from minus 40.5 four weeks ago. The index for Republicans was minus 44.8 compared with minus 38.2 a month earlier.
Some company officials are concerned by rising fuel costs and the labor market even as their earnings climb. MasterCard Inc., the world’s second-biggest bank-card network, this week posted a first-quarter profit that beat analysts’ estimates as consumers stepped up spending.
“I still remain concerned about housing prices and unemployment in the United States, about food- and gas-price inflation around the world,” Chief Executive Officer Ajay Banga said in a conference call yesterday. “I remain cautiously optimistic.”
