Job and building data weak
The number of newly laid-off Americans filing jobless claims and the pace of home construction both posted worse-than-expected results in government data released Thursday, lending urgency to the economic recovery plan President Obama and Congress are scrambling to advance.
The latest batch of economic news cemented fears that the recession, already in its second year, will drag on through much of 2009.
The reports “paint a bleak economic landscape ahead,” said Stuart Hoffman, chief economist at PNC Financial Services Group.
And the furious pace of layoffs continued Thursday, with Microsoft Corp. saying it will slash up to 5,000 jobs over the next 18 months. Chemicals maker Huntsman Corp. will ax 1,175 jobs this year and will get rid of an additional 490 contractors. Those and other employers have seen customer demand wane and are cutting costs to survive the fallout.
“The corporate sector is rolling over, and we probably have not yet seen many job losses stemming from the sudden collapse in international trade,” warned Ian Shepherdson, chief U.S. economist at High Frequency Economics. “The labor market remains a disaster area.”
First-time applications for unemployment benefits jumped last week by 62,000 to 589,000, the Labor Department reported. That was much more than the 540,000 tally economists expected. It left claims matching a 26-year high reached four weeks ago, although the workforce has grown by about half since then.
Part of the rise was blamed on a backlog of claims that piled up in recent weeks as several states experienced computer crashes from a crush of filings, a government analyst said.
The number of unemployed people continuing to draw jobless benefits soared by 97,000 to 4.6 million. That figure, too, was above analysts’ expectations and was up considerably from a year ago, when 2.7 million people were receiving such aid. The pickup shows that those out of work are having trouble finding a new job.
Some economists believe the number of people continuing to draw unemployment benefits could rise to 5.5 million -- possibly more -- this year even if a new stimulus package is enacted.
On top of the 4.6 million covered by the regular unemployment insurance program, 2 million Americans requested benefits under an emergency extension authorized by Congress last year. But the figure is not seasonally adjusted and is volatile.
Meanwhile, the miserable state of the U.S. housing market was in full view Thursday, and the outlook remained dim.
The Commerce Department reported that new-home construction plunged 15.5% in December to an annual rate of 550,000 units, an all-time low, capping the worst year for builders on record dating to 1959. Last month’s performance was weaker than economists expected and shattered the previous record low set in November.
“The extent of the decline was breathtaking,” said Joel Naroff, president of Naroff Economic Advisors. “Home builders were simply sitting around watching the grass grow, and conditions are not likely to change soon.”
For all of last year, the number of housing units that builders broke ground on totaled just over 904,000, also a record low. That marked a huge, 33.3% drop from the 1.355 million housing units started in 2007. The previous low was set in 1991.
The report also showed that applications for building permits -- considered a reliable sign of future activity -- sank to a rate of 549,000 in December, a 10.7% drop from the previous month.
Rising defaults, tighter lending standards and fear about the housing market’s future have sidelined buyers, an absence felt acutely by home builders such as D.R. Horton Inc., Pulte Homes Inc. and Centex Corp.
