US Unemployment Claims and Home Sales Drop
Cited: Reuters
An indication of a slower pace of the economic recovery is a reduction in the sales of previously owned homes in the United States that was unexpected in four months as of August. However, this was overshadowed by David indicating a pall in the number of new jobless benefit claims in the US in September. At the same time, sector banks in Europe and the US scaled-back their massive injections of dollars into the banking system as a markets stabilize after the worst global financial crisis since the “Great Depression”
The National Association of Realtors (NAR) said sales of existing U.S. homes fell 2.7% to an annual rate of 5.10 million units, disappointing market expectations for a rise to a 5.35 million unit pace. That was the first fall since April.
Another report from the U.S. Labor Department showed new claims for unemployment benefits unexpectedly fell 21,000 to a seasonally adjusted 530,000 last week. Analysts polled by Reuters had expected initial claims to rise to 550,000.
The housing report did little to change views that the economy is recovering from its worst recession in 70 years but raised doubts about how long the rebound will last.
“Everyone knows the third quarter (economic growth) is going to be very good, the question is how sustainable is this recovery and will the housing market be able to fly on its own once the emergency government aid is removed,” said Zach Pandl, an economist at Nomura Securities International in New York.
The Federal Reserve, the U.S. central bank, on September 23 acknowledged activity had picked up and noted the improvement in the housing sector when it left its key overnight lending rate near zero.
A top White House economic adviser, Christina Romer, said on September 24 the U.S. economy was “back from the brink”, but warned policy-makers against removing fiscal and monetary stimulus too quickly.
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Stocks on Wall Street dropped on the homes report and worries that authorities might be curbing stimulus too soon. Government bond yields fell as the data strengthened perceptions the economic recovery could falter once stimulus from government spending fades. Leaders of the G20 group of rich and developing nations were gathering in Pittsburgh to discuss ways of rebalancing the world economy to prevent another banking crisis and recession.
SELF-SUSTAINING RECOVERY SOUGHT
U.S. home sales have been boosted in recent months by an $8,000 government tax credit for first-time buyers and an improving economic picture as well as the lowest prices and mortgage rates in decades. The tax credit expires at the end of November and NAR chief economist Lawrence Yun said the industry group was lobbying to have it extended into next year to avoid what he called a double-dip recession for the housing market.
A housing sector collapse was the main force behind the recession, which started in December 2007.
“The housing market is close to reaching a point of self-sustaining recovery. We are pushing for the extension of the tax credit so that we achieve this,” Yun told reporters.
The decline in August sales was a minor retreat after a strong rise in July, Yun said, and issues related to appraising home values could have led to delays or cancellations of contracts to buy homes. Pending sales contracts rose in July. Despite the monthly decline, Augusts’ sales pace was the second-highest in 23 months, and sales of previously owned homes rose 3.4% compared to August last year.
The August national median home price of $177,700, off 12.5% from August last year, continued to be weighed down by distressed properties, which accounted for 31% of sales last month.
The inventory of existing homes for sale in August fell 10.8% to 3.62 million units from July, the NAR said. Augusts’ sales pace left the supply of previously owned homes on the market at 8.5 months from 9.3 months’ worth in July.
“Supply is getting close to the level of 7.5 months that has historically been consistent with stable house prices,” said Paul Dales, U.S. economist at Capital Economics in Toronto.
“That said, home sales remain 30% below their peak and the fall back in August illustrates that the recovery is going to be gradual and patchy rather than quick and firm.”
Stubbornly high unemployment continues to cast a pall over the strength of the economic recovery, which many economists agree is already under way. While fewer workers submitted applications for unemployment benefits last week, analysts said initial claims had to fall below 500,000 to signal a recovery in the labor market.
“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 Advisors in St. Louis, Missouri.
What is considered a better gauge of the labor market trends is the four-week moving average of new claims, which has dipped to 553,500 the lowest since January according to the Labor Department. After the initial week of benefits, the number workers drawing unemployment after the first week of benefits fell 123,000 to 6.138 million in the week ending September 12. Ace any decline in jobless claims on a weekly basis bodes well for September’s US nonfarm payrolls report that is due out October 2.
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My Take: Well, some good news comes out of Washington DC. It would be nice if they extended the tax break for first-time homebuyers. It might give those that are only dreaming about owning a house a chance to fulfill that dream.
That would mean that people who are utilizing suburban property management companies to maintain the houses they own would be able to sell one if they wanted to and get the money they are worth. The recession has caused house prices to go down so many people have even turned to Maple Grove home rental services just to pay the mortgage on their first house because they could not sell it.
Another people seem to be going back to work, they will also be able to board the house that they have. Everything gets me about unemployment is affected many people will not take the “shit” jobs because they do not pay enough. The jobs I’m talking about or like McDonald’s or Burger King. The idea is to have income and be able to put food on the table for your family, not the shame of having to take such a job.
Places like McDonald’s, Burger King, and Taco Bell also need to stop and think about who they are hiring. I have seen many of these types of companies not hire someone because they are overqualified just to hire a teenager instead. Yes, the overqualified person may not be there long, but you at least know that at the get-go. A teenager, you never know how long they are going to stay and if they will even be able to do the work as directed. I am sorry, I would rather hire 10 overqualified people then 3 teenagers.
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