Recent data suggests that crises in the job and housing markets have begun to subside. But a thorough examination of the numbers suggests the U.S. economy still has a lot of healing to do.
Government reports released today (Thursday) revealed the number of Americans filing initial claims for unemployment benefits was lower than forecast last week, while U.S. housing starts and new building permits jumped to their highest level in nine months in August.
But continuing jobless claims rose by 129,000 in the week ended Sept. 5, when they were forecast to be little changed. And while housing starts managed a small increase from July, new permits – considered a gauge of future activity – were down a whopping 44% from a year ago, according to the Commerce Department.
American Workers Facing Jobless Recovery?
Initial applications for jobless benefits dropped by 12,000 to 545,000 in the week ended Sept. 12, down from a revised 557,000 the week before. Overall, payrolls lost "only" 216,000 jobs in August, which was lower than economists' forecast and the smallest number of job losses in a year.
Most analysts took the drop in initial unemployment claims as a sign the labor market is deteriorating at a slower pace as the economy pulls out of the recession.
"The drop in initial claims suggests that the severe pressures on the labor market continue to subside," Alan Gayle, senior investment strategist at Ridgeworth Investments in Richmond, Virginia told Reuters. "Clearly the strains remain, but we are seeing some gradual improvement from the peaks we were at some months ago."
U.S. President Barack Obama said in comments this week that unemployment is "bottoming out," and cited increases in exports and heightened manufacturing activity as evidence of long-awaited economic expansion.
But even though U.S. Federal Reserve Chairman Ben S. Bernanke said on Tuesday that the worst U.S. recession since the 1930s has "very likely" ended, he cautioned that unemployment may take longer than normal to recover, especially if economic growth remains "moderate."
Amid signs the job market may be starting to stabilize, a survey this month of economists by Bloomberg indicated the unemployment rate would soar past 10% in 2009, another sign that American workers may still be facing a jobless recovery.
Since the recession started in December 2007, the economy has shed 6.9 million jobs, the highest number of job losses since the Great Depression.
"It's nice to see another move down in initial claims but the continuing number is definitely kind of sticking at pretty high levels," Michael Feroli, an economist at JPMorgan Chase & Co. (NYSE: JPM) told Bloomberg News. "As long as we're continuing to see pretty high initial and continuing claims, we'll still have negative job growth."
Housing Starts and Permits Disappoint
Soaring unemployment has cast a pall over the housing market, but U.S. homebuilders are beginning to feel more confident, according to an industry report released this week.
A housing market index released Wednesday by The National Association of Home Builders (NAHB), showed confidence among homebuilders rose by one point to 19, the highest level since May 2008. Still, a reading below 50 indicates builders continue to view negatively the future prospects for selling new, single-family homes.
Another gauge in the NAHB report measuring sales expectations for the next six months fell by a point to 29.
Housing starts increased by just 1.5% in August from July's revised 589,000, and are down by 29.6% from a year ago. A survey of economists by Dow Jones Newswires had forecast a 3.3% increase.
Adding to builders' anxiety is the expiration of an $8,000 tax credit for first-time homebuyers, which is set to end in November.
White House Spokesman Robert Gibbs this week said the administration's economic team is evaluating the tax credit's effect on new home sales and will soon make a recommendation on extending the credit to the president.
If the credit is not extended past November, builders fear the upward trend in housing sales could be stalled or even reversed.
A revision to the latest data showed new-home sales exceeded forecasts in July, extending a string of gains to four straight months, putting a much-needed dent in inventories.
The NAHB report indicated much of the increase might be due to falling prices of new homes, with median prices down by 11.5% since July 2008.
"The real reason home sales are picking up is that home prices have collapsed," Mike Larson, a Weiss Research analyst commenting on the NAHB index told The Wall Street Journal. "That collapse has made housing affordable once again in many markets."
News and Related Story Links:
- U.S. Department of Commerce:
New Residential Construction in August 2009
U.S. housing starts, permits at 9 month high
- Money Morning:
Jobless Recovery Category
U.S. Initial Jobless Claims Fell to 545,000 Last Week
- Wall Street Journal:
Housing Starts Post Moderate Rise