Retail Sales Are Steady; Jobless Claims Dip

Reports released Thursday offered some encouraging signs the resilient consumer can hold the economy afloat and that the labor market is stabilizing.

The Commerce Department said retail sales, which make up about 40% of consumer spending, were unchanged in October at a seasonally adjusted $301.7 billion.

But the picture brightened when a 1.9% drop in auto sales was stripped out. Without autos, retail sales logged the biggest gain in six months, an unexpectedly strong 0.7%.

Although markets and many economists took the news as a good sign for the recovery, it was clear that cheap auto-financing deals, which have helped fuel consumer spending over the last several months, are beginning to lose their allure.

Still, a separate Labor Department report showing a second straight week of declines in new applications for jobless benefits offered hopes the labor market may be struggling out of a weak patch.

The Labor Department said jobless claims dipped by 8,000 to a seasonally adjusted 388,000 last week. The more reliable four-week moving average of claims also fell, breaking a 10-week run above the 400,000 mark economists see as signaling a lackluster labor market.

“The jobless claims data is not insignificant. This plays into the view that yes, we’re in a soft spot but perhaps we’ve seen the worst of it,” said Alan Ruskin, research director at 4Cast Ltd. in New York.

Many economists expressed lingering concern about future prospects for consumer spending -- the key force holding up the economy.

Worries of a possible military action against Iraq, terror threats and the loss of wealth from tumbling stock markets could hinder spending, they cautioned.