Whether their focus was the labour market, business spending or the housing market, economists received uniformly disappointing readings on the US economy yesterday, suggesting that the recession continues to deepen.
The number of people taking regular unemployment benefit topped 5 million last week, it was reported, passing a psychological milestone. The number of first-time claimants increased to 667,000 from 631,000 the previous week, when forecasters had been predicting a decline.
The US has shed 3.6 million jobs since the recession began in December 2007. And businesses have been cutting spending on big-ticket investments as well as reducing staff numbers, according to the latest durable goods figures, covering January. Durable goods include machinery, vehicles and computer hardware, as well as some consumer items, such as carpets and kitchen appliances.
The Commerce Department reported durable goods orders falling at a 5.2 per cent annual rate last month, twice as big a decline as expected. Activity has now fallen for six consecutive months.
Kevin Logan, a senior US economist at Dresdner Kleinwort, said it was possible there would be some stabilisation in the economy in the second half of the year, but from a much lower level.
"I don't see any silver linings today," he said. "The recession is getting deeper. The number of people unemployed keeps rising. Where previously we have seen about 590,000 jobs a month disappearing, in February we'll see 750,000, and that means cuts in what people are spending, which itself is a big, powerful force."
The decline in durable goods orders presages further job losses, as manufacturers reduce production to try to clear stockpiles of unwanted goods. Declines were particularly steep for computers and related products, which were down 16 per cent, while demand for cars and steel was also hard hit.
The parade of gloomy news continued with a survey of new homes sales, showing the number of transactions collapsed in January to the lowest level since records began in the 1960s. The annualised sales rate fell to 309,000 – its sixth monthly decline in a row – from 344,000 in December. The average price of a new home last month was 17.6 per cent lower than in January 2008.
A glut of foreclosed homes has been pushing down prices across the housing market, and demand has collapsed because even people who are able to find a mortgage are fearful of losing their jobs or of losing money if the market keeps falling. The recession has its roots in the US housing market, because declining home values have wiped more than $500bn (£350bn) from the value of loans held by the banking system, leading to the credit crunch.Reuse content