WASHINGTON, (Reuters) - The number of Americans claiming jobless aid hit a record in early April and groundbreaking for new homes slumped last month, but a top Federal Reserve official voiced hope the recession was ending.
“Today, the economy is still very weak, but there are some encouraging signs that support cautious optimism,” Federal Reserve Bank of Atlanta President Dennis Lockhart said in a speech in New York on Thursday.
Wall Street stocks, taking heart from expectations of reassuring results from corporate bellwethers as economic conditions start to turn the corner, closed higher, with the Dow Jones industrial average rising 1.2 percent to 8,125.
New claims for jobless aid dropped unexpectedly last week in a potentially brighter sign for employment -- although the timing of the Easter and Passover holidays might have skewed the data -- while a steep decline in new housing starts may help work off a heavy overhang of unsold homes.
In addition, contraction in factory activity in the U.S.mid-Atlantic region slowed in April, according to a survey by the Philadelphia Fed.
Its business index came in at minus 24.4 from minus 35 in March, somewhat better than a Reuters forecast for minus 32. A reading below zero signifies contraction.
There have also been other promising signs the severity of the recession may be fading. Nokia said on Thursday that mobile telephone destocking, as shops run down inventories before putting in new orders, had bottomed in some markets.
In addition, U.S. officials have clearly begun to talk up the recovery. Fed Chairman Ben Bernanke noted tentative signs of stability this week and Lockhart repeated this theme.
GREEN SHOOTS
“I do not expect a strong recovery, but I do expect the economic contraction we're now experiencing to give way to slow and tentative growth as early as the third quarter,” Lockhart told the Levy Economics Institute at Bard College.
But the tone of the key data was still pretty bleak,emphasized by news that General Growth Properties Inc, the second-largest U.S. shopping mall owner, had filed for bankruptcy in the largest real estate failure in U.S. history.
“Taken together, both (housing and jobs) releases will put a damper on the nascent optimism we've seen in the markets in the past couple of weeks,” said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.
“While the situation in housing and in the labor markets is not necessarily deteriorating, it's clear that there is no real sign of recovery whatsoever,” he said. The U.S. Commerce Department said housing units fell 10.8 percent in March to a seasonally adjusted annual rate of 510,000 units, the second lowest on records dating back to 1959, from February's 572,000 units.
Analysts polled by Reuters had expected an annual rate of 540,000 units for March. “The trend seems to be leveling after a calamitous plunge after the Lehman blowup. Single-family (home) permits have been a bit more volatile than starts but tell essentially the same story; we think they too have hit bottom,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Separately, the Labor Department said the number of U.S. workers filing new claims for jobless benefits unexpectedly fell 53,000 last week to 610,000.
But so-called continued claims rose to a record 6.02 million in the week to April 4.
The most severe U.S. recession in a generation has already cost five million jobs, driving the unemployment rate up to 8.5 percent in March, and many economists see it heading higher.
The four-week average of new jobless claims, a better gauge of underlying labor trends because it irons out week-to-week volatility, fell to 651,000 from 659,500 the week before.
“The four-week moving average for initial claims usually peaks about two months before the trough of a business cycle, which means the recession could end as early as June,” Michael Darda, chief economist at MKM Partners, LLC wrote in a note.
“That would still give us a 19-month downturn, the longest in post-World War Two history,” he said. The Federal Reserve, in a regular survey of business conditions, said on Wednesday the labor market remained soft with lay-offs and hiring freezes widespread. But five of its 12 regional banks saw the pace of decline in the economy slowing.
The Fed -- the U.S. central bank -- also said there were signs the housing market was stabilizing, with an increase in the number of prospective buyers improving confidence.
House hunters are being lured by very low mortgage rates following hefty efforts by the Fed to drive down home loan costs.
It has cut key interest rates to almost zero and pumped over $1 trillion into credit markets, including massive buying of mortgage-backed securities, to encourage spending and investment.
However, a report earlier on Thursday from RealtyTrac showed U.S. foreclosure activity was up 46 percent in March from a year earlier, hitting a record high as programs stunting the torrid pace of failing mortgages expired. |
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