Thursday, February 26, 2009

Grim US data show deepening downturn

Grim US data show deepening downturn

By Alan Rappeport

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New US jobless claims unexpectedly spiked last week, reaching the highest level since 1982 as companies continued cutting jobs.

Initial jobless claims grew to 667,000 in the week ending February 21, from a revised 631,000 the previous week, labour department figures showed on Thursday. The results disappointed economists who expected new claims to remain flat. Meanwhile the number of Americans continuing to claim unemployment benefits hit a fresh record in the second week of February, topping the 5m mark for the first time.

Although jobless figures have been shattering records each week, when adjusted for population growth the claims are still well below the peaks reached in the mid-1970s and early 1980, notes Ian Sheperdson, chief US economist at High Frequency Economics. Weekly claims would need to breach 1m to match those low points.

The US economy lost a half million jobs for the third month running in January, bringing the unemployment rate to 7.6 per cent, the highest level since 1992. The accelerating pace of job losses in February have led some economists to predict that payrolls will fall by as much as 750,000 this month, bringing the unemployment rate to 8 per cent.

“Companies are throwing in the towel as they recognise that no sector is safe,” Mr Sheperdson said.

Companies also cut back on orders for durable goods in January, signalling more weakness in the manufacturing sector as the industrial downturn has intensified. Government figures showed on Thursday that orders fell by 5.2 per cent, more than twice as much as analysts expected and worse than the revised 4.6 per cent decline the month before.

Excluding transportation, orders dropped by 2.5 per cent in January and those for non-defence capital goods, excluding aircraft, declined by 5.4 per cent. According to economists at RDQ Economics, total durable goods orders have plunged by an annual rate of 43 per cent during the last three months.

“The recent trend has been quite poor, indicating an ongoing collapse for capital spending,” said Joshua Shapiro, chief US economist at MFR.

A bright note was inventories, as companies succeeded in reducing their stocks of manufactured durable goods last month. Inventories shrank by 0.8 per cent in January after growing by 0.4 per cent in December.

Separately on Thursday the commerce department said that sales of new homes in the US plunged to a record low last month as buyers continued to wait for prices to fall further. New home sales fell by 10.2 per cent in January to an annual rate of 309,000 from a revised 344,000 in December and were off by 48.2 per cent on the year.

The median home price also fell last month, sliding to $201,100, down from a revised $223,200. The median price of a new home fell by 13.5 per cent on the year to January.

“Housing activity remains in freefall,” said Paul Dales, US economist at Capital Economics. “Nonetheless, prices are going to continue falling for some time.”

Existing homes have also been under pressure. On Wednesday the National Association of Realtors said home resales fell by 5.3 per cent to an annual rate of 4.49m in January, a 12-year low.

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