Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Jobless Claims and Housing Market Data Point to Worsening Economy

Economics / Double Dip Recession Jul 24, 2010 - 02:17 PM GMT

By: Barry_Grey

Economics

Best Financial Markets Analysis ArticleReports issued Thursday on initial claims for unemployment benefits and sales of previously owned homes confirm that the US economy is slowing dramatically.

The Labor Department reported that initial jobless claims for the week ended July 17 rose by 37,000 to 464,000. The number was far higher than the consensus forecast of economists. It underscored the bleak prospects for any significant reduction in the unemployment rate, now officially at 9.5 percent.


The four-week moving average of initial claims also rose, hitting 454,750, up 1,250 from the previous week. In a healthy economy with substantial hiring, initial jobless claims usually fall below 400,000.

Also on Thursday, the National Association of Realtors reported that existing home sales fell 5.1 percent in June to an annual rate of 5.37 million units. It was the second consecutive monthly drop. Home sales in the US are down 26 percent from their peak in September 2005.

The sales figure followed other housing data released earlier in the week showing that the housing market recovery is collapsing. Housing starts fell in June to the lowest level since October, and homebuilder sentiment fell this month to its lowest level since April 2009.

In May, pending home sales plunged 15.9 percent from the year-earlier period to the lowest level since the National Association of Realtors began collecting statistics in 2001.

In a front-page article Wednesday headlined “Housing Market Stumbles,” the Wall Street Journal noted, “Demand for home purchase mortgages sits near a 14-year low, according to the Mortgage Bankers Association, down 44 percent over the past two months.”

Underlying the renewed housing slump is the jobs crisis, the worst since the 1930s. Home sales and construction are falling despite the fact that mortgage rates are the lowest in decades and home prices have fallen sharply. But demand is low because so many people are either out of work or afraid of being laid-off, or are working fewer hours for less pay.

In addition, a quarter of homeowners are “under water,” i.e., they owe more on their mortgage than the sale price of their home. Consequently, they cannot sell their present home to move into another.

The flood of foreclosed homes is further undermining the housing market. Bloomberg wrote on Thursday, “Foreclosures and short-sales are boosting the so-called shadow inventory, and competing with owners trying to sell properties. Home seizures jumped 38 percent in the second quarter from a year earlier, RealtyTrac said last week, putting lenders on pace to claim more than 1 million properties this year.”

Also on Thursday, the Conference Board reported that its index of leading economic indicators fell 0.2 percent in June. It was the second decline in three months.

“The indicators point to slower growth through the fall,” said Ken Goldstein, an economist at the Conference Board.

The release of the economic data coincided with two days of congressional testimony by Federal Reserve Chairman Ben Bernanke, in which the central bank chief acknowledged a slowdown in what was already a torpid economic growth rate.

Presenting the Fed’s semiannual monetary policy report to Congress, Bernanke appeared Wednesday before the Senate Banking Committee and Thursday before the House Financial Services Committee. He said the US economic outlook was “somewhat weaker” than previously indicated, and focused on persistent high unemployment and the slowdown in the housing market.

On jobs, Bernanke acknowledged that the Fed expected the unemployment rate to decline even more slowly than it had previously forecast, leaving the official jobless rate at 7.0 percent to 7.5 percent at the close of 2012. The Fed forecasts the jobless rate to be between 9.2 percent and 9.5 percent in the final quarter of 2010.

He acknowledged that the pace of private payroll growth in the first half of 2010—100,000 a month, on average—is “insufficient to reduce the unemployment rate materially.”

The US central bank recently cut its estimate for US growth in 2010 from 3.2-3.7 percent to 3.0-3.5 percent. It expects the economy to pick up only slightly to 3.5 percent to 4.5 percent in 2011 and 2012.

This is a projection for, at best, years of extremely high unemployment, with all of the attendant social consequences. But what shook the stock market on Wednesday was Bernanke’s remark that the economic outlook was “unusually uncertain.” This sent the Dow tumbling, leading to a 109-point drop at the close of trading.

In his Senate testimony Wednesday, Bernanke said the Fed was prepared to take new steps in the event of the economy slipping back toward negative growth. However, he made clear that it had no plans in the near term to intervene further.

On Thursday, before the House committee, Bernanke placed more emphasis on the willingness of the Fed to take unorthodox measures to prevent deflation or a “double-dip” recession. He made clear that these measures would aim to increase the flow of cheap credit to major banks and corporations, bolstering their profits.

Bernanke implicitly indicated that the Fed would not support any measures to directly create jobs, such as a public works program, or any major government spending to provide relief for the millions of workers facing long-term unemployment, the loss of their homes, utility shutoffs, and a slide into destitution.

While he cautioned against immediately ending all forms of economic stimulus, he reiterated his repeated demand that the government formulate a medium-term plan to slash social spending in order to reduce the budget deficit.

Bernanke’s testimony Thursday, combined with more second-quarter corporate reports showing bumper profits, sparked a rally on Wall Street, with the Dow closing up by 201 points.

President Obama has repeatedly declared that the economy is “headed in the right direction.” His administration has dropped even its minimal proposals to aid financially desperate state and local governments and subsidize job creation.

It is pursuing the ruling class policy of using mass unemployment to drive down the wages and living standards of the working class, and preparing sweeping austerity measures to make working people pay for the budget and debt crisis of US capitalism.

While workers are suffering the impact of this policy, big business is benefiting handsomely. Corporations registered record profit gains in the first quarter of 2010, and they are expected to rise another 19.3 percent this quarter, as compared to a year ago. The profit surge is largely the result of downsizing, wage cutting and speedup.

In a recent column in the New York Times, Roger Altman, an investment banker and deputy treasury secretary in the first Clinton administration, defended Obama against criticisms from some business leaders by citing his pro-corporate record. He pointed out that profits are up 41 percent since Obama was elected and the Dow has risen by more than 28 percent over the same period.

World Socialist Web Site

Barry Grey is a frequent contributor to Global Research. Global Research Articles by Barry Grey

© Copyright Barry Grey , Global Research, 2010

Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in