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Spending fell, claims up
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January 31, 2002: 10:15 a.m. ET
U.S. spending off 0.2%, jobless claims up 30,000, above forecasts.
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NEW YORK (CNN/Money) - Personal incomes posted their biggest increase since last summer in December but consumer spending still edged lower, the government reported Thursday. New jobless claims rose.
Spending edged down 0.2 percent last month after a revised 0.3 percent decline in November even though personal incomes rose 0.4 percent, the biggest increase since a matching rise last July, the Commerce Department reported. The figures were about in line with forecasts by Wall Street economists.
Spending fell last month as low-financing offers by automakers had less impact. Consumer spending is watched closely by economists and investors since it fuels two-thirds of the U.S. economy.
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Some day I wouldn't be surprised if we go back and take a look at this whole episode and really question whether or not we really had a recession.
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Charles Lieberman
Advisors Financial economist |
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Charles Lieberman, chief economist with Advisors Financial, told CNNFN's Before Hours that this trend may continue in the first quarter.
"It wouldn't be surprising if there was a little bit of a pullback in consumer spending in the first quarter because of the zero-percent financing in the fourth quarter, which makes for a very difficult comparison," he said.
Separately, the Labor Department said first-time claims for state unemployment benefits rose by 30,000 to 390,000 for the week ended Jan. 26. The reading was a shade above analysts' estimates.
The reports came a day after the Federal Reserve held interest rates steady after cutting them 11 times last year in a bid to spur growth.
In the fourth quarter, consumer spending rose a surprisingly strong 5.4 percent, one of the reasons the economy grew at a 0.2 percent rate in the quarter, versus most economists' forecasts for another decline.
For more on the Fed and rates, click here
For all of 2001, Americans' incomes and spending each rose 4.9 percent. The gain in spending was the smallest since 1991, but consumer spending did not collapse under the strain of rising unemployment and economic turmoil, a good sign to many analysts.
The nation's unemployment rate, 5.8 percent, is expected to rise in the coming months. The government's January jobs report Friday is expected to show an increase in unemployment to 5.9 percent, according to economists surveyed by Briefing.com.
But in a sign that the job market may be slowly improving, the four-week moving average of jobless claims, which smooths out weekly blips, fell by 15,250 to 386,000 claims in the latest week. That was the lowest level since Aug. 18 of last year.
Analysts say the economy's recovery will depend partly on whether consumers keep spending despite rising unemployment. Lieberman told CNNfn that the economy probably bottomed out in the fourth quarter and that despite the recent pullback, consumers are still looking to spend.
Check out CNN's economic calendar
In fact, Lieberman said that if it weren't for the massive decline in inventories and virtual freeze in capital spending by technology companies last year, the economy likely wouldn't even be in a slowdown since consumer spending held up strong.
"Some day I wouldn't be surprised if we go back and take a look at this whole episode and really question whether or not we really had a recession," Lieberman said. 
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