Housing, labor, retail data show a weaker economy
The U.S. housing market has still not reached bottom, the number of workers drawing jobless benefits has hit a 2 1/4 -year high and consumers are tightening their purse strings, reports showed Thursday, suggesting that the economy may have screeched to a halt.
Pending sales of previously owned homes fell 1.5% in December and were off a sharp 24% from a year earlier, the National Assn. of Realtors said.
Separately, the Labor Department said new claims for unemployment aid edged down from a two-year high last week, but the number of workers remaining on the benefit rolls has hit a level not seen since October 2005, in the aftermath of Hurricane Katrina.
On the retail front, a spate of reports showed consumers had pulled back on spending. Sales in January were below expectations and were down at some key retailers.
“The risk of recession has certainly gone up,” said Mark Vitner, economist at Wachovia Securities in Charlotte, N.C., who expects growth to remain lackluster until housing bottoms out around midyear.
For all of 2007, pending home sales -- a gauge of contracts signed for sales that have yet to close -- came in at the lowest level since the real estate industry trade group began tracking the data in 2001.
“It’s a great borrowing environment, but it’s not translating into sales because everybody is looking for the bottom of the market,” said Bob Moulton, president of mortgage brokerage Americana Mortgage Group in Manhasset, N.Y.
Sales will not pick up until prices, which have been falling across the United States, come down further, Moulton said.
The Realtors group projected that sales would remain soft until the second half of this year and said the market should then begin to improve. Prices for existing homes were likely to drop 1.2% this year, it said, with prices for new homes tumbling 4.3%.
New applications for unemployment benefits fell 22,000 last week to 356,000, partially reversing an upward spike the week before. But economists said the level, which was higher than expected, still suggested a weakening labor market.
“Generally, a 350,000-to-375,000 range is a recession warning zone,” said Lindsey Piegza, market analyst for FTN Financial. The softening labor market has made it increasingly difficult for unemployed workers to find new jobs.
The number of people remaining on benefit rolls after drawing an initial week of aid rose 75,000 to 2.79 million in the week that ended Jan. 26. It was the highest level of so-called continued claims since October 2005.
A soft job market could further imperil the consumer spending that supports two-thirds of the economy’s output. Already, signs have emerged that spending has weakened.
A report from the Federal Reserve showed that U.S. consumer borrowing rose a smaller-than-expected $4.5 billion in December after soaring more than $17 billion in November.