WASHINGTON — Worse-than-expected news on unemployment and home sales today dampened optimism that a broad economic recovery might be near.
The Labor Department said initial claims for unemployment compensation rose to a seasonally adjusted 640,000, up from a revised 613,000 the previous week. That was slightly more than analysts’ expectations of 635,000.
Economists are closely watching the unemployment compensation data because they believe a sustained decline in the number of initial claims could signal the end of the recession is nearing. Jobless claims have historically peaked six to 10 weeks before recessions end, according to a report by Goldman Sachs. Initial claims reflect job cuts by employers.
But the latest report shows job 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.
Abiel Reinhart, economist at JPMorgan Chase Bank, said further declines in the four-week average “would show that our forecast for a resumption of economic growth in (the third quarter) is reasonable.”
Other economists said that despite the bigger-than-expected rise in new jobless claims, the range has remained mostly steady for about two months. That’s a signal that the pace of layoffs may be leveling off.
But 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.
Meanwhile, the National Association of Realtors said home sales fell 3 percent to an annual rate of 4.57 million last month, from a downwardly revised pace of 4.71 million units in February. Sales had been expected to fall to an annual pace of 4.7 million units, according to Thomson Reuters. The median sales price plunged to $175,200, from $200,100 a year earlier, but up from $168,200 in February.
The results were “a little disappointing” given that homes are more affordable than they’ve been in years and mortgage rates are near record lows, said Lawrence Yun, the group’s chief economist.
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. First-time homebuyers purchased about half of all homes sold last month.
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 cleanup stage now,” Sheila Bair, chairman of the Federal Deposit Insurance Corp., said at a financial reform conference.
A year ago, new jobless claims stood at 353,000, while there were 2.93 million continuing claims. The Labor Department also said 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. That provides an additional 20 to 33 weeks on top of the 26 weeks typically provided by the states.
The high level of continuing claims is a sign that many laid-off workers are having difficulty finding new jobs.
Employers have cut 5.1 million jobs since the recession began in December 2007 in an effort to slash costs as consumers and businesses have sharply reduced spending. The department said earlier this month that companies cut a net total of 663,000 jobs in March, sending the unemployment rate to 8.5 percent, the highest in 25 years.
Based on another increase in continuing claims, Reinhart expects the unemployment rate will rise to 8.9 or 9 percent this month. Many private economists expect the monthly jobless rate will climb to 10 percent by the end of this year.
The jobless rate in the U.S. is expected to average 8.9 percent this year and climb to 10.1 percent next year, the IMF said.
The job cuts reflect the depth of the downturn, which has been global in scope. The International Monetary Fund estimated Wednesday that the global economy would shrink 1.3 percent this year, the first drop in more than six decades. The IMF projects the U.S. economy will decline 2.8 percent, the worst since 1946.
“The world economy is going through the most severe crisis in generations,” Treasury Secretary Timothy Geithner said Wednesday.
The Obama administration is counting on its $787 billion stimulus package, enacted in February, to “save or create” 3.5 million jobs.
More job losses were announced this week. Yahoo Inc. said it will layoff 700 employees, the third round of mass layoffs this year. And oilfield services provider Halliburton Co. said it has cut 2,000 positions in the first three months of the year.
Among the states, Florida saw the largest increase in claims with 9,303 for the week ending April 11, which it attributed to more layoffs in the construction, service and manufacturing industries. The next largest increases were in Pennsylvania, California, Wisconsin and New York.
Michigan saw the largest drop in claims with 12,566, which it said was due to fewer layoffs in the automobile industry. The next biggest declines were in North Carolina, Missouri, Kentucky and Oregon.
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