Two-track economy: 9.7% unemployment, $200K cars
AP Economics Writer
WASHINGTON (AP) – For the super-rich and everyone else, the economic recovery is taking place in two very different gears.
A British company is betting there’s a market in North America for a $200,000 sports car built with Formula One race technology, announcing Thursday that it will unveil the very expensive new toy late next year.
“Following any recession, there’s a resurgence,” said Ron Dennis, chairman of McLaren Automotive. “We intend to catch that wave.”
For most people, though, the economy’s still a clunker. A new Labor Department report said more than 11 million Americans are now getting unemployment benefits.
The number of first-time claims for unemployment fell last week for the third time in a row, a sign the job market is slowly healing. But claims remain above levels that would signal the economy is actually generating new jobs.
There are other signs of the economic split:
– Luxury clothing stores outpaced others last month and brought in more money than expected. At Nordstrom, sales at stores open at least a year surged 10.4 percent. Sales only rose 2.4 percent at Target, and 1.2 percent at J.C. Penney.
– Business at high-end hotels is coming back much faster than at mid-price or budget hotels, says Patrick Scholes, an analyst at FBR Capital Markets. Revenue at luxury hotels was up 7.7 percent last week from a year ago. At less fancy hotels, revenue fell.
– While overall U.S. auto sales were up 13 percent for February, luxury brands did even better. Revenue rose 32 percent for General Motors’ Cadillac brand, nearly 14 percent for BMW and 17 percent for Honda’s Acura. Sales of the Lexus were up 5 percent while overall sales at Toyota fell because of widespread recalls.
Confidence in the economy has risen most among wealthier Americans, said Jonathan Basile, an economist at Credit Suisse. Rising stock prices are helping: The S&P 500 index has surged more than 70 percent since its bottom last spring.
Inflation, meanwhile, has all but vanished. Consumer prices were flat in February. The absence of inflation allows the Federal Reserve to keep the short-term interest rate it controls at a record low to nurture the economic recovery.
One reason for the rebound in upscale corners of the economy is that Americans with jobs now worry less about losing them. Layoffs have slowed, and the jobless rate, now at 9.7 percent, appears to be leveling off.
Lynnae McCoy, who runs a money-saving blog called beingfrugal.net, said she’s noticed a difference in sentiment between readers who have jobs and those who don’t.
A year ago, when the stock market sank to 12-year lows, “there was lots of panic” among her readers. Those out of work are still taking extreme steps, such as making their own detergent. But those who still have jobs aren’t as interested in clipping coupons.
McLaren, meanwhile, is banking on renewed spending to bolster demand for its MP4-12C sports car, which will go on sale in late 2011 with a price of 125,000 to 150,000 pounds – as much as $228,000 at today’s rates.
The company plans to make up to 1,000 of the cars next year, with up to 40 percent being sold in North America.
“Our volumes are very much linked to how we see the recovery,” Dennis said.
AP Writers Jane Wardell in London and Anne D’Innocenzio and David Brinkerhoff in New York contributed to this report.