Data shows ‘robust’ housing market, while labor market will take ‘long time’ to heal
Economic data underscored the ongoing and uneven recovery of the U.S. economy, as pending home sales spiked while initial jobless claims remain high.
Initial claims dipped to a seasonally adjusted 1.006 million in the week ended Aug. 22 from the previous week’s downwardly revised level of 1.104 million, originally reported as 1.106 million the Labor Department said Thursday.
Economists polled by IFR Markets projected 1.000 million claims in the week.
Continuing claims fell to 14.535 million on the week ended Aug. 15 from a downwardly revised level of 14.758 million a week earlier, first reported as 14.844 million.
“Continued claims remain uncomfortably high, suggesting the labor market will take a long time to heal,” said Scott Anderson, chief economist at Bank of the West.
Marvin Loh, senior global macro strategist at State Street, said initial and continuing claims, as well as pandemic data continues to show that the easy jobs gains following reopenings are done. “With weekly claims still around 1 million, the fourth straight week around these levels, the slowing of phased economic expansions continues to impact further expansion in the jobs markets,” he said. “Prior weekly gains were somewhat offset by larger-than-expected reductions in continuing claims. Those gains also seem to slow, giving the Fed a glimpse into the level of structural unemployment going into the fall, when school reopenings and cooler weather may again impact the trajectory of the virus.”
The states showing the largest rise in claims in the week ending Aug. 15 were: New Jersey (11,580), Florida (11,190), New York (9,879), Texas (9,096), and Tennessee (3,793), while the states with the biggest drops were: California (12,155), Nevada (6,817), Georgia (4,236), Puerto Rico (2,864), and Pennsylvania (1,510).
"There’s been no substantial easing of historically high demand for unemployment assistance, something we’ve seen for five months now,” said Mark Hamrick, senior economic analyst for Bankrate. "New jobless claims dropped slightly by 98,000 latest week, while continuing claims are still shockingly high. In total, more than 27 million claims were made across all programs as of the end of the first week of the month, including 10.9 million under the special pandemic (PUA) program."
While data stabilizing is “encouraging in that at least things are not getting worse,” Loh said, the elevated levels of unemployment continue to “scream” a message. “That message is that additional stimulus is needed and risks stalling the economic recovery that started to emerge over the summer,” Loh said.
Hamrick believes there is “no obvious end in sight” in regards to the 23 weeks of elevated claims, while agreeing with Loh about the added pressure the political gridlock is putting on the economy.
“Unfortunately, the inability of Congress and the president to agree on new round of relief legislation undoubtedly adds downward pressure to the economic recovery, to consumer confidence and the ability to spend,” Hamrick said. "As the political conventions wind down, the reality is no matter who wins the White House, the nation’s economy will continue to face significant challenges for some time to come."
Pending home sales
Pending home sales gained 5.9% in July, after a 15.8% jump in June, the National Association of Realtors said Thursday.
Economists anticipated a 4.5% rise.
“There was more positive news on the existing housing market, implying home sales will remain robust over the near term,” Bank of the West's Anderson said. “Primarily due to pent-up demand.”
Year-over-year, pending sales grew 15.5%.
“We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market,” said Lawrence Yun, National Associationj of Realtors chief economist. “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”
Gross domestic product sunk 31.7% in the second quarter on a seasonally adjusted annual basis, according to the second read, the Commerce Department said Thursday.
Economists surveyed by IFR Markets had expected a contraction of 32.5%. The advance estimate showed a bigger 32.9% plunge.
In the first quarter, GDP fell 5.0%.
Final sales of domestic product was 28.5% lower in the second quarter, following a 3.6% decline in the first quarter.
The personal consumption expenditures price index slid 1.8% in the second quarter, after rising 1.3% in the first quarter. Excluding food and engery the core PCE price index dropped 1.0% after a q.6% gain in the first quarter.
“The second estimate on second quarter real GDP revealed a slight improvement, on modest upward revisions to real consumer spending, business investment, government spending and net exports,” said Anderson. “We are forecasting real GDP will rebound around 26.0% at an annualized rate in the third quarter.”
Kansas City Fed manufacturing
Regional manufacturing activity “increased more in August than in June and July, but it was still below year-ago levels,” said Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City,
The composite index rose to 14 in August from 3 in the prior month.
The six-month expectations composite index gained to 19 from 14 last month.