Two bellwether reports on unemployment and housing yesterday (Thursday) gave off signals of a sluggish economic recovery, as the United States struggles to emerge from the worst slowdown since the Great Depression.
The reports suggest the economy has finally found some relief.
Existing-home sales in the United States fell unexpectedly for the first time in four months in August, as the housing market continued to wrestle with a deluge of distressed properties, causing inventories to rise and prices to dip.
Separately, U.S. workers filing new unemployment claims declined last week to the lowest level in two months, surprising economists who had forecast an increase in jobless claims, the Labor Department reported. Meanwhile, total claims lasting more than one week also decreased.
The reports came on the heels of a statement from the Federal Reserve on Wednesday that activity had "picked up" and the Fed would continue to support the housing sector by leaving its key overnight lending rate near zero.
Existing Home Sales Drop
Sales of previously owned homes slumped 2.7% to an annualized rate of 5.1 million from August 2008, the National Association of Realtors (NAR) said today in Washington. Wall Street analysts had forecast a sales rate of 5.39 million.
"It was a mild retreat from a very strong gain," NAR economist Lawrence Yun told The Wall Street Journal, noting the sales rate was the second highest level in 23 months. Sales of existing homes hit a two-year high in July, when sales topped 5.24 million, the fourth increase in a row.
Distressed properties continued to depress the market as the national median home price fell by 12.5% to $177,700 in August, down from $203,200 the year before. The high number of foreclosed properties continued to distort prices in August, the NAR said, accounting for 31% of sales.
Some analysts took heart from a reduction in the number of homes on the market, as existing homes for sale in August fell 10.8% to 3.62 million units from July. It would take only 8.5 months to sell existing inventory at the August sales pace, down from 9.3 months in July.
"There's probably some good news in that even though sales were a bit weaker the supply came down pretty meaningfully…so continuing to make our way back to a bit more balanced number," Keith Hembre, chief economist at First American Funds in Minneapolis, Minn. told Reuters.
High numbers of foreclosures may have had a positive effect on sales, as lower prices combined with a government tax credit for first-time buyers and lower mortgage rates probably moved some would-be buyers off the sidelines.
Unemployment Slowly Improves
Stubbornly high unemployment rate continues to weigh on the nascent economic rebound, as more than 6 million jobless workers deal with a jobless recovery that is forcing them to curtail spending.
The latest news from the Labor Department on unemployment was slightly positive as initial claims for jobless benefits unexpectedly fell by 21,000 to 530,000 in the week ended Sept. 19. A poll of analysts by Reuters had expected initial claims to rise to 550,000. The previous week's level was revised from 545,000 to 551,000.
Still, the August monthly jobs report showed the unemployment rate had climbed to 9.7% – the highest level in 26 years – confirming views that the job market will be slow to recover.
The four-week moving average of new claims and the number of continuing claims, which most analysts consider a better indication of unemployment trends, both fell.
"The labor market is stabilizing. We're not quite down to the level that would signal that the economy is creating more jobs than it is losing, but we could reach that point later this year or early next year," said Gary Thayer, a strategist at Wells Fargo & Co. (NYSE: WFC) in St. Louis, Mo.
On Tuesday, lawmakers in the House approved a 13-week extension of jobless insurance benefits for unemployed Americans in states with rates higher than 8.5%. If passed by the Senate, it would be the fourth extension since the recession began in December 2007.
Majority Leader Harry Reid, D-Nev., said the Senate is expected to approve the extension quickly. The bill would limit the benefit extension to residents of 25 states – about 70% of the U.S. population – House Democrats said.
The bill would extend federal assistance to the jobless ranks in the hardest hit states to 46 weeks. About 400,000 long-term jobless workers would exhaust their benefits by the end of September, House Democrats estimate, and that number could rise to 1 million by the end of the year, The Journal reported.
News & Related Story Links:
- Money Morning:
Fed Says Economy Picks Up But Keeps Lid on Interest Rates - The Wall Street Journal:
Existing Home Sales Dropped in August - Money Morning:
Jobless Recovery Category - Reuters:
U.S. home sales, jobless claims unexpectedly drop - The Wall Street Journal:
House Votes To Further Extend Unemployment Insurance Benefits
The REASON that "total claims lasting more than one week also decreased" is because each week more and more people are exhausting their benefits! I live in Ohio (which has a total of 79 weeks of benefits available), and I haven't seen a check in 3 weeks. I would imagine the same is even more true in states that don't offer as many weeks of benefits.
Fewer NEW people are being laid off because fewer people are working in the first place. It's gotten to the point where companies are operating with skeleton crews. The only way to reduce the payroll from its current level is to shut the doors. Unless drastic measures are taken, we'll be seeing a lot of this in the very near future.