MARTIN CRUTSINGERWASHINGTON (AP) ¿ Worse-than-expected news on unemployment and home sales Thursday dampened optimism that a broad economic recovery might be near. Many analysts don't expect the housing slide to show signs of stabilizing until the second half of this year. They said layoffs may be at their high point, but that the jobless rate, already at a 25-year high, will keep rising until the middle of 2010. The Labor Department reported Thursday that initial claims for unemployment compensation rose to a seasonally adjusted 640,000 last week, up from a revised 613,000 the previous week. That was slightly more than analysts' expectations of 635,000. Meanwhile, the National Association of Realtors said sales of existing homes fell 3 percent in March to a seasonally adjusted annual rate of 4.57 million units, with February revised down to 4.71 million units. Sales had been expected to fall to an annual rate of 4.7 million units, according to Thomson Reuters. The best reading of the new data is that late last year's alarming free-fall is coming to an end, analysts said
"The economic downturn remains intense, but it is no longer intensifying," said Mark Zandi, chief economist at Moody's Economy.com. "We are still falling, but we are no longer crashing." Zandi said the weekly number of new applications for unemployment benefits, a key measure of layoffs, has begun to level off at a very high point. The unemployment rate, however, will keep rising for the rest of this year and into 2010 since it measures layoffs and the ability of new entrants into the labor market to find a job, he added. On the housing front, IHS Global Insight economist Patrick Newport is still forecasting further declines in construction, sales and prices. He expects existing home sales will bottom out in the second half of this year, partly reflecting a significant improvement in affordability. With prices and mortgage interest rates both declining sharply, homes have become more affordable. But Newport expects sales to remain at depressed levels for another year as rising unemployment crimps demand. IHS forecasts unemployment, currently at a 25-year high, will peak at 10.2 percent in the spring and summer of next year, Newport said. The latest jobless claims data suggest the unemployment rate for April will jump to 8.9 percent with employers cutting another 625,000 jobs. That report will be released May 8.
In March, the jobless rate hit 8.5 percent with businesses slashing a net total of 663,000 jobs. The latest weekly report on jobless claims showed losses remain high. The four-week average of claims, which smooths out volatility, dropped slightly to 646,750, about 12,000 below the peak in early April. Goldman Sachs economists have said a decline of 30,000 to 40,000 in the four-week average is needed to signal a peak. In another sign of labor market weakness, the number of people continuing to claim benefits rose to 6.13 million, setting a record for the 12th straight week. As a proportion of the work force, the total jobless benefit rolls are the highest since January 1983. The continuing claims data lag initial claims by a week. The report from the National Association of Realtors showed that the median sales price for an existing home in March plunged to $175,200, from $200,100 a year earlier. With unemployment rising and the mortgage crisis far from over, foreclosures and distressed sales are dominating the market ¿ especially in California, Florida, Nevada and Arizona. The Realtors group estimates about half of sales nationwide are from foreclosures or other distressed properties.
A top banking regulator tried to ease some concerns, saying banks and the housing sector had passed the worst part of their downturns. "I think we're past the crisis stage. We're in the clean up stage now," Sheila Bair, chairman of the Federal Deposit Insurance Corp., said at a financial reform conference. Bair said the FDIC was preparing a "test sale" of some troubled mortgage loans owned by banks probably in June to help guide the FDIC in developing a larger program that aims to buy toxic mortgages from banks as a way of boosting their ability to resume more normal lending. On Wall Street, stocks ended higher on a volatile trading day with investors bouncing between worries about the worse-than-expected economic readings and stronger-than-expected earnings from Apple Inc., eBay Inc., PNC Financial Services Group Inc. and others. The Dow Jones industrial average added more than 70 points to 7,957.06. Finance officials from around the globe will hold three days of meetings in Washington starting Friday to review efforts to combat what the International Monetary Fund characterized this week as the most severe global economic slump since the Great Depression. The discussions will be a follow-up to a summit of leaders of the Group of 20 nations held in London on April 2.
President Barack Obama and the other leaders pledged to boost the resources at the IMF and other lending institutions by $1.1 trillion to help developing nations withstand the economic slump. There was little expectation that differences that remain over how to jump-start growth would be resolved during the weekend discussions. The Labor Department also said Thursday that an additional 2.3 million people were receiving benefits under an extended unemployment compensation program enacted by Congress last year, as of April 4, the latest data available. Employers have cut a net total of 5.1 million jobs since the recession began in December 2007. The Labor Department also reported that mass layoffs, or job cuts of 50 or more by a single employer, increased to 2,933 in March, the most on records dating to 1995. More than 299,000 workers were fired in last month's cuts. The manufacturing sector alone accounted for 1,259 mass layoffs, resulting in nearly 156,000 new jobless claims, also records. ____ AP Business Writers Christopher Rugaber and Alan Zibel contributed to this report.