Housing, jobless data point to a fragile recovery By CHRISTOPHER S. RUGABER and MARTIN CRUTSINGER, AP Economics Writers Christopher S. Rugaber And Martin Crutsinger, Ap Economics Writers 2 hrs 43 mins ago WASHINGTON – Housing construction rose in August and the number of newly laid-off workers seeking unemployment aid fell unexpectedly last week, adding to signs the recession has ended.
Still, the reports suggested a slow and fragile economic recovery. In part, that's because the increased housing starts were due solely to a surge in construction of apartment buildings — while the much larger single-family homes sector fell for the first time in six months. And jobless claims remain far above the levels associated with a healthy economy. Even as the housing industry begins to recover from its worst downturn in decades, a glut of unsold homes and record levels of home foreclosures are weighing on the industry. Construction of multifamily homes and apartments rose 1.5 percent to an annual rate of 598,000 units, the highest level since November, the Commerce Department said Thursday. That was slightly lower than the 600,000-unit pace economists had expected. And it remains more than 70 percent below the peak rate hit in 2006. The tentative improvements in housing are most likely a rebound "from unsustainably weak results ... reinforced by a temporary boost to demand" from the $8,000 first-time homebuyer tax credit that ends Dec. 1, Joshua Shapiro, chief economist at MFR Inc., wrote in a note to clients. "Gains from here on will probably be much more difficult to achieve," due to high unemployment, tight credit and a large number of new and existing homes already on the market, he said. Applications for building permits, a gauge of future activity, rose a 2.7 percent in August to an annual rate of 579,000 units, slightly below the 580,000 level that had been forecast. Permits for single-family homes dipped 0.2 percent but rose for multifamily units by 15.8 percent. The 1.5 percent rise in housing starts followed a small 0.2 percent dip in July. The August strength reflected a 25.3 percent surge in construction of multifamily units, a volatile sector that had fallen 15.2 percent in July. The single-family sector dipped 3 percent last month to an annual rate of 479,000 units, the first setback following five straight monthly gains. Paul Dales, U.S. economist at Capital Economics, noted that housing starts remain 74 percent below their 2006 peak and predicted the housing recovery would be a very "long-winded process." Meanwhile, initial claims for unemployment benefits dropped last week to a seasonally adjusted 545,000 from an upwardly revised 557,000 the previous week, the Labor Department said Thursday. Wall Street economists expected claims to rise by 5,000, according to Thomson Reuters. The decline was the third in the past four weeks. The four-week average, which smooths out fluctuations, dropped 8,750 to 563,000. Despite the improvement, that's far above the 325,000 per week that is typical in a healthy economy. "The message here is that the labor market's healing process is agonizingly slow," Shapiro said. The number of people claiming jobless benefits for more than a week rose by 129,000 to a seasonally adjusted 6.2 million. The continuing claims data lags initial claims by one week. When federal extended benefits are included, 9.01 million people received unemployment insurance in the week ending Aug. 29. That's down from 9.16 million the previous week. Congress has added up to 53 weeks of extended benefits on top of the 26 weeks provided by the states. Some economists said the overall housing construction gain was an encouraging sign that the worst is over for that troubled market. "This sector is likely to start adding to growth rather than holding back the economy," said Joel Naroff, chief economist at Naroff Economic Advisors. Regionally, construction rose 23.8 percent in the Northeast and 0.9 percent in the Midwest. Activity was flat in the West and fell 2.4 percent in the South. Builders have been ramping up because buyers want to take advantage of the new federal tax credit for first-time homebuyers. The National Association of Home Builders said this week that its housing market index rose in September, reflecting growing optimism in the industry about rising home sales. The trade association said its index rose one point to 19, the highest reading since April 2008. Homebuilders' stocks jumped following the release of that report and mostly moved higher early Thursday. Shares of Beazer Homes USA Inc., and Hovnanian Enterprises Inc., were each up more than 6 percent in morning trading. Financial results for homebuilders also were better than expected in the latest quarter. The Dow Jones U.S. Home Construction Total Stock Market Index has surged since bottoming in November but remains about 72 percent below the level achieved at its recent peak in 2005. Thursday's reports come a day after the Federal Reserve said production by the nation's factories, mines and utilities increased for the second straight month in August, the latest sign the economy is recovering. But the economy isn't improving fast enough to spur greater hiring. Fed Chairman Ben Bernanke on Tuesday said the recession is likely over, though he noted that the economy isn't likely to grow fast enough to lower unemployment anytime soon. The jobless rate is widely expected to peak next year above 10 percent, up from its current 9.7 percent. Some analysts say that claims need to drop below 400,000 before the unemployment rate will start to decline. More job cuts were announced this week. Drugmaker Eli Lilly & Co. said Monday that it will cut 5,500 jobs over the next two years, 14 percent of its work force, as it restructures the company into five business units. Among the states, Washington had the largest increase in claims of 4,546, which it attributed to greater layoffs in the construction, public administration, and manufacturing industries. The next largest increases were in Pennsylvania, Massachusetts, North Carolina and Illinois. The state data lag initial claims by a week. California had the largest drop in claims of 2,751. The next largest decreases were in New York, Wisconsin, Texas and New Jersey. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
