Economic Reports – New Home Sales, Durable Goods Orders, Unemployment Claims – Point to Deepening Economic Malaise
Sales of new single-family homes fell 10.2% in January to an annual rate of 309,000 units, a new record low (see chart 1). Sales of new single-family homes declined in the Midwest (-5.6%), South (-6.5%), and West (-28.0%) but rose in the Northeast (+12.5%).
Sales of new single-family homes have dropped 78% from the peak in July 2005, the largest peak-to-trough decline on record (see table 1).
The median price of a new single-family home was $201,000 in January, down 23.3% from the peak in March 2007, the largest peak-to-trough decline on record. On a year-to-year basis, the median price of a new single-family home was down 13.4% in January, the largest drop was 14.6% in July 1970.
Additional declines in prices of new homes are nearly certain, given the inventory of unsold new homes. There was a 13.3-month supply of new single-family homes in the market in January, also a new record (see chart 2).
The good news is that number of completed homes for sale continues to decline (see chart 3) which should reduce the inventory going forward.
Builders are taking a record number of months (median = 9.3 months, see chart 4) to sell a new home.
Initial jobless claims increased 36,000 to 667,000 during the week ended February 21. Continuing claims, which lag initial claims by one week, rose 114,000 to 5.112 million (see chart 6).
Although charts 5 and 6 paint a very bleak situation in the labor market, they overstate the situation somewhat because the numbers do not take into consideration the growth of the labor force.
The insured unemployment rate reflects the labor market status more accurately than the absolute level of unemployment claims. The insured unemployment rate advanced to 3.8%, the highest since June 1983 (see chart 7). The demand for labor remains significantly weak.
Orders of durable goods plunged 5.2% in January, marking the fifth monthly decline in the last six months. The 35.3% drop in bookings of defense items and other widespread declines more than offset the 81.7% jump in order of civilian aircraft. Nearly all major categories of durable goods – primary metals (-4.6%), machinery (-2.0%), computers and electronic products (-5.0%), electronic equipment and appliances (-6.1%) and autos (-6.4%) – posted a drop in booking during January. Orders of non-defense capital goods excluding aircraft moved down 5.4% in January, putting the year-to-year decline at 20.2%.
Total shipments of durable goods fell 3.7% in January, inclusive of a 6.6% drop in shipments of non-defense capital goods excluding aircraft. The latter component is the input for equipment and software spending in the GDP report. The weak January for shipments of non-defense capital goods excluding aircraft is a big blow to capital spending in the first quarter.
