April 24th, 2009 09:32 EST
Jobless Rate Increases As Home Sales Drop; Economic Downturn Not Over Yet
Figures of unemployment claims filed by recently laid off U.S. laborers increased last week, and the sales of pre-owned homes on the market dropped in March, indicating that the economy has not yet begun to bounce back from the programs passed by the U.S. government meant to curb the recession`s effects.
The Labor Department announced that the numbers of first-time claims for unemployment assistance jumped dramatically from 27,000 to 640,000 last week. The department also said that the figures for those currently on the program beyond their first week of receiving compensation rose from 93,000 to a record-high 6.14 million by the week`s end at April 11th.
The week of April 11th marks the 14th consecutive 7-day term during which these ongoing claims reached historic levels. The facts distinguish how challenging it is for the workforce to adequately find employment.
But as experts have explained in the department`s most recent findings, the numbers for initial claims actually stayed beneath the 674,000 recorded late last month, a new all-time high since 1982, and point toward a stagnation in the economy`s decline. The recession is going into its 17th month, and any news regarding fluctuations in the market are followed closely. Economists are monitoring the rates that might soon reflect the positive redirection the economy may be heading.
Omair Sharif, a senior economist at RBS Greenwich Capital in Greenwich, Connecticut, said: "That number is supportive of the argument that we are stabilizing a little bit, but it does not mean we are at a point where we`re going to start recovering any time soon."
The figures of sales on previously owned houses, though falling 3 percent last week, have been interpreted by analysts as the beginning of a bottoming-out in the housing market.
The U.S. stock market reported gains during the week however, mainly on the prediction of an upswing in earnings for many regional banks and financial firms. Prior to last week, many foresaw a plummet in stocks due to investors` worries over the instable market. At week`s end, the S&P 500 rose 8.37 points finishing out at 851.92 and the Dow Jones industrial ascended 70.49 points bringing their 7-day totals to 851.92.
Government bonds also jumped in price, but profits hit a ceiling with investors when concerns arose over how the debt supply, financing the government`s economic bailout plans, was forecast to snowball.
Once the recession reaches the 17th month anniversary, it will become the longest economic crisis since the Great Depression. The recession, which is generally agreed to have started in December 2007, is mainly responsible for the estimated 5 million jobs lost in the United States. Experts have apprehensions over the figure that is on pace to climb rapidly as businesses strive to defend their bottom-line and maintain profit margins.
With the growing unemployment count not expecting to come down, the insured unemployment rate, which keeps track of the percentage of unemployed workers in the country on a weekly basis, ended at 4.6 percent last week: the highest percentage rate since January 1983. The rate went up 0.1 percent from the week prior at 4.5 percent.
Contributing to the optimistic outlook, the four-week average of new unemployment cases, which is a scale used by experts to measure contemporary trends in job cuts, fell slightly from 651,000 to 646,750 in the span of one week by April 11th.
Tony Crescenzi, chief bond analyst at Miller Tabak & Co. in New York, endorsed the opinion on how layoffs may be imminent due to companies` practices in keeping profits as unimpacted as possible.
"Jobless claims show signs of moving toward a sideways pattern and they may have peaked, albeit at levels that suggest very large declines in payrolls, say around 600,000 (job positions) per month," Crescenzi said. "The steadying signals a slowing in the ace of decline in the economy."
Compounding job cuts have been the determining cause behind why average household incomes are beginning to backslide, according to economic analysts. As homeowners are stricken by the buyer`s market, many are unwilling to give up their properties for a loss, and even more are unable to afford homes in the current economic conditions because of the volatile job market.
The housing market, a significant impetus for the economic disruption, seemed to be steadying, backed by many first-time home buyers who have been allured by the rock-bottom housing prices, according to NAR Chief Economist Lawrence Yun.
Yun said: "We are hoping from early summer we will get a consistent rise in home sales. If not, then the U.S. economy is in trouble."
Yun continued to say that the troubled housing sales constituted nearly half of all house sales recorded for March, and in reference to the end of an abeyance on foreclosures that has been raised by most lenders coming up, this ratio is predicted to increase.
The National Association of Realtors reported that the sales estimates of pre-owned homes dropped from a 4.71 million unit annual rate in February to 4.57 million in March. The overall number of already constructed homes for sale also declined, from 3.799 million to 3.74 million, demarcating a 1.6 percent drop in the 9.8-month supply amidst the most recent sales rate.
March also saw a peak in the median national home price at $175,200: a 4.2 percent increase from the month of February. Though the data is seen as a byproduct of seasonal factors, the median home price is down 12.4 percent from the same term one year ago.
Michael Darda, chief economist at MKM Partners in Connecticut, said: "It appears that home sales are establishing a trough, with the low for January holding tus far through the revisions. We continue to believe the first quarter will mark the low for home sale, but it will take time to work off excess inventories."