Hiring splurges, but consumers stay frugal

The economy still has some trouble spots, but analysts are seeing signs of a gathering rebound that could lift off if consumers decide to open their wallets and jump in with both feet.

"The economy is improving and corporate profits are strong. They grew a little more than 8 percent in the third quarter," said Paul Edelstein of Lexington-based IHS Global Insight.

The job market also is showing signs of gains, with the Labor Department reporting yesterday that employers added 203,000 jobs in November and the unemployment rate fell to
7 percent, a five-year low. The Dow Jones industrial average jumped 198 points.

Boston University School of Management executive-in-residence Mark T. Williams, a former Federal Reserve Bank examiner, said stock market prices are indicators of future expectations in the economy.

"The stock markets across the board are hitting new highs, suggesting blue skies ahead," Williams said.

A key factor, though, is how willing consumers are to spend. Consumer confidence in December hit its highest level in five months, according to the Thomson Reuters/University of Michigan preliminary report released yesterday. But retail numbers show shoppers spent less over the Thanksgiving weekend than the year before.

"In general, consumers can express frustration, but keep on spending as if nothing is wrong," said Edelstein. We've seen that many times."

Edelstein said the improving job numbers can hide some dark clouds, as well.

"The unemployment rate is one number and it is falling more than expected, but it's falling because people are leaving the job market," Edelstein said. "It's schizophrenic, but overall the labor market is improving."

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