New layoff filings jump as companies retrench
WASHINGTON (AP) - July 24, 2008 The bleak reports underscored the self-reinforcing cycle
hampering the economy: As home prices sink, foreclosures rise,
banks feel pressure to shy away from lending and employers cut
jobs.
The Labor Department said the number of newly laid-off people
filing for unemployment benefits rose to 406,000 last week, a jump
of a seasonally adjusted 34,000. The last time jobless claims were
higher was after the Gulf Coast hurricanes in 2005.
The housing news wasn't any better: As sales of previously owned
homes fell in June and a glut of unsold and foreclosed homes on the
market, the value of Americans' biggest asset continued to sag.
The median price for a home sold in June was $215,100, a drop of
more than 6 percent from a year earlier and the fifth-largest
year-to-year price drop on record, the National Association of
Realtors said. Sales of previously owned homes fell 2.6 percent, to
an annualized rate of 4.86 million.
With companies laying off workers and new jobs increasingly hard
to find, the ranks of new homebuyers could shrivel further,
spelling even more trouble ahead for the housing market and the
economy. Consumer spending, the very lifeblood of the economy, is
further in jeopardy.
"If you don't have a job or are concerned about keeping your
job, you are not going to rush out to buy anything - let alone a
home," said Richard Yamarone, economist at Argus Research.
Wall Street sent stocks lower on the housing and jobs news, plus
a record quarterly loss at Ford Motor Co. and sharply lower
earnings for Dow Chemical Co. The Dow Jones industrials lost more
than 280 points.
The economic problems are on the minds of voters and
presidential candidates, not to mention Capitol Hill and the White
House. The troubles are expected to persist into the next
presidential administration.
The country's economic straits are the public's biggest worry by
far. Forty-four percent listed the economy as the top concern in a
new Associated Press-Ipsos poll, up from 39 percent in April.
The White House, while noting that layoff filings can bounce
around from week to week, acknowledged the job market needs to be
bolstered.
"The bottom line is that unemployment, while relatively low by
historical standards, is still higher than we would like, and we
continue to take action to return to strong job creation," said
White House press secretary Dana Perino.
Congress is nearing completion of a housing bill that President
Bush is expected to sign. It aims to help some distressed
homeowners avoid foreclosure and to shore up troubled mortgage
giants Fannie Mae and Freddie Mac.
Rising mortgage rates are also adding to the headaches. Rates on
30-year mortgages zoomed to 6.63 percent this week, the highest in
nearly a year, as worries about inflation and the financial shape
of Fannie and Freddie gripped investors.
It hasn't spooked all buyers. Seattle office manager Connie
Kerby, 44, jumped into the market in June, paying $134,000 for a
condominium that had been listed nearly $5,000 higher.
She was waiting for prices to drop further, but was concerned
interest rates are on the way up. She watched rates jump from 5.5
percent to 6.2 percent in the four months she shopped for a home.
"For me, that's a significant difference," she said.
But that's only a glimmer of hope from the West, where big price
declines in many parts of California may be helping to make homes
affordable once again.
Chafing under all the economy's problems, nervous employers have
cut jobs for six months in a row. The unemployment rate, now at 5.5
percent, is expected to climb to 6 percent or higher by early next
year.
Faced with dueling threats - sluggish growth and higher
inflation - the Fed, for now, is expected to hold a closely watched
interest rate steady when at its next meeting Aug. 5.
The Fed was cutting rates regularly but halted that approach
because of concerns about inflation. But boosting rates too soon
could also harm the fragile economy and crippled housing market.
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Associated Press writers Martin Crutsinger in Washington and
Alex Veiga in Los Angeles contributed to this report.