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WASHINGTON — U.S. jobless claims jumped and the pace of existing home sales tumbled to a 10-year low as slowing growth hit hiring and a glut of unsold houses weighed on real estate, data released Thursday showed.
The number of U.S. workers filing new claims for jobless benefits jumped 34,000 last week, the Labor Department said, in part reflecting seasonal volatility typical at this time of year, but also indicating that jobs were hard to find.
A separate report from the real estate industry said that home sales dropped 2.6 per cent in June, dragging the annual sales pace to the lowest since early 1998.
The Dow Jones industrial average closed 2.4 per cent lower as the data darkened hopes for the economy and a record $8.7-billion (U.S.) second quarter loss by Ford Motor Co. underlined the severe headwinds confronting manufacturers.
U.S. government bonds, which benefit from signs of economic weakness, extended gains. The dollar lost ground against the yen, but bounced against the euro after news in the euro zone cooled expectations of higher interest rates.
Sliding U.S. house prices and mounting losses from the subprime mortgage market sparked a credit crunch last year that has chilled growth and hiring, despite aggressive cuts in benchmark interest rates by the Federal Reserve, the U.S. central bank.
“The message from claims is that unemployment is still rising,” said James O'Sullivan, economist at UBS Securities in Stamford, Connecticut.
Initial claims for state unemployment insurance benefits rose to a seasonally adjusted 406,000 in the week ended July 19, from a revised 372,000 the prior week, the U.S. Labor Department said. It was the highest reading since late March and above forecasts of 376,000 new claims.
A Labor Department official noted that estimates were being affected by annual auto plant shutdowns, the end of the quarter, and the holiday-shortened July 4 reporting week.
The four-week average of new jobless claims, a better gauge of underlying labour trends because it irons out week-to-week volatility, rose to 382,500 from 378,000.
“The average is still hanging right around that 375,000, which denotes a slow-growth economy, a pretty flat economy, not quite a recession,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco.
HOUSING WOE
Housing is at the heart of the slowdown and officials hope conditions will start to slowly improve once it finds a bottom, although economists warn this may still be some way off.
The pace of existing home sales in the United States fell in June to a 4.86 million-unit annual rate, according to the National Association of Realtors.
“Anecdotally, there's a lot of foreclosed properties coming to the market. This is telling us any bottoming in the housing market will be very long and drawn out. It will take a long time for inventories to return to normal,” said Richard DeKaser, chief economist at National City Corp in Cleveland.
Economists polled by Reuters were expecting home resales to fall to a 4.93 million-unit pace, from the 4.99 million rate initially reported for May. The June rate was the lowest since a 4.83 million rate in early 1998, the Realtors said.
The inventory of homes for sale held steady at 4.49 million homes or 11.1 months of supply at the current sales pace, down only slightly from the record level of supply in April.
The median national home price declined 6.1 per cent from a year ago to $215,100.
“With sales weakening, we expect continued declines in residential construction. However, it appears that the rate of decline in second-quarter 2008 was somewhat slower than the 25 per cent annualized pace over the previous half year,” Bank of America senior economist Peter Kretzmer wrote in a note.
