Analysts Unfazed by Round of Weak Economic Reports
Rising unemployment claims and business failures and stagnant home sales reported in statistics released Thursday stirred concern about the economic recovery, but analysts remained optimistic that the economy would avoid a “double dip” recession.
“The national statistics have been quite good for four or five months, but it is not atypical to get a monthly setback now and then,” said Kurt E. Karl, a senior economist at the WEFA Group, an economic forecasting firm in Bala-Cynwyd, Pa.
The National Assn. of Realtors reported Thursday that nationwide existing home sales in June rose a slim 1.4% above May’s rate of 3.54 million units.
But the housing picture was much bleaker in California. The California Assn. of Realtors reported that existing-home sales in the state declined 7.2% in June to an annualized rate of 487,650 units. The drop prompted several analysts to lower their earnings estimates for the state’s largest home builder, Los Angeles-based Kaufman & Broad Home Corp.
On another economic front, the Labor Department reported Thursday that the number of Americans filing claims for unemployment benefits rose by 30,000 for the week ended July 13. It was the second straight weekly increase and pushed the total number of new weekly claims up to 425,000.
Employers are suffering as well as workers. Business failures during the first half of the year increased 50% to 43,014 from 28,669 during the first six months of 1990, according to Dun and Bradstreet Corp. The failures appeared to touch every major industry group, the New York-based financial ratings agency said.
But the lackluster statistics did not alter analysts’ expectations of economic growth in the second quarter. They predict that the gross national product, which is a measure of the value of all goods and services produced in the United States, will grow at an annual rate of about 1%. The actual figure will be released today.
“There will be some plateauing,” said David Wyss, research director for the economics forecasting firm DRI/McGraw Hill Inc. But Wyss said that even though the recovery will be “weak,” the economy would not slip back into a recession because “consumers are a lot more confident than they were during the war.”
Still, the recovery is “fragile” said Robert Curran, a housing analyst at Merrill Lynch. And the unemployment statistics, he said, were especially troubling because they may cause consumers to clamp down further on their spending.
“Right now there is a lot of concern that the economy is behaving erratically,” Curran said.
An example of the economy’s erratic behavior was the June drop in California’s existing home sales after four consecutive months of gains. The statewide median single-family home price also declined 1.6% in June to $204,090, according to the California Assn. of Realtors.
Leslie Appleton-Young, vice president of research and economics at the CAR, said in a prepared statement that the drop in sales activity reflected “a sluggish California economy and fading consumer confidence after the post-war upturn.”
But James Z. Pugash, director of Montgomery Securities Real Estate in San Francisco, said the drop in California was largely fueled by events in Sacramento, where a red-hot housing market turned ice cold in June as residents stopped house hunting in the wake of the state’s widely publicized budget impasse and concerns about massive layoffs of state employees.
Home sales in Sacramento fell 40.2% from June, 1990, and the median price fell nearly 4% from a year ago.
Other hard-hit markets included Palm Springs, the Central Valley and some Northern California counties. But sales in June jumped 25.9% in Monterey, 12.7% in Los Angeles, 11.7% in San Diego and San Francisco and a huge 43.9% in Ventura County.
Existing Home Sales
Seasonally adjusted annual rate, millions of units June, ‘91: 3.59 May, ‘91: 3.54 June, ‘90: 3.37
Source: National Assn. of Realtors
