New signs emerge that recession may be easing as housing nears a bottom Christopher S. Rugaber, AP Economics Writer Thursday April 16, 2009, 5:00 pm EDT
WASHINGTON (AP) -- Housing construction unexpectedly plunged, the number of people receiving jobless benefits grew and JPMorgan Chase & Co. said its first-quarter profit dropped compared with last year. That was the bad news. But those same reports Thursday included some silver linings suggesting the recession may be easing. The pace of new-home construction seems to be nearing a bottom. First-time jobless benefit claims fell more than expected for the second straight week. And JPMorgan's profits were larger than analysts had expected. In the past week, two other banks, Wells Fargo & Co. and Goldman Sachs Group Inc., issued positive earnings reports, too. All told, growing evidence indicates the economy may be stabilizing. "The economy is still very weak, but there are some encouraging signs that support cautious optimism," Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said in a speech Thursday. The Commerce Department said construction of new homes and apartments fell 11 percent in March. But economists noted that the drop was driven by a steep fall in new apartment building. The construction of new single-family homes matched February's level and remained above January's record low. The consistency in home construction, even as the economy shrank, signals that single-family home building "is now at or near a bottom," Robert Dye, senior economist at PNC Financial Services Group, wrote in a note to clients. Economists cautioned that the figures largely reflect a slowing of the pace of economic decline compared with even worse conditions earlier this year. Recovery is still at least months away, they said. "What would have been bad news last September is good news today," said Diane Swonk, chief economist at Chicago-based Mesirow Financial. On Wall Street, stocks rose, partly in response to the economic news. The Dow Jones industrial average closed up 95 points, while broader indices also rose more than 1 percent. Both President Barack Obama and Federal Reserve Chairman Ben Bernanke have mentioned some recent signs of progress this week, while adding that the recession is far from over. The Commerce Department said construction of new homes and apartments fell to a seasonally adjusted annual rate of 510,000 units in March. It was the second lowest pace on records that go back 50 years. Applications for building permits, considered a good barometer of future activity, also fell in March to an annual rate of 513,000 units. But that suggests housing starts will remain stable at around 500,000 in April, economists said, albeit near record low levels. "Right now, stable looks good," Dye said. Low housing prices and record-low mortgage rates may finally be spurring sustained interest in home buying. The Federal Reserve reported Wednesday that the number of people shopping for homes is beginning to rise, leading to a scattered pickup in sales. Separately, the Labor Department said its tally of initial unemployment claims dropped to a seasonally adjusted 610,000 from a revised 663,000 the previous week. That was far below analysts' expectations of 655,000 and the lowest level since late January. Initial unemployment claims reflect the pace of layoffs by companies and are considered a timely, if volatile, measure of the economy. While declining, they remain much higher than a year ago, when claims stood at 369,000. Economists are watching the jobless claims figures for signs of recovery. Goldman Sachs said in a report this week that claims "normally peak six to ten weeks before the end of recession." The four week average of claims, which smooths out fluctuations, fell by 8,500 to 651,000, the department said. That's still far short of the 30,000 to 40,000 drop that Goldman Sachs said would be needed before it would conclude that claims have peaked. Finding a new job is increasingly difficult for those who have been laid off. Typically, hiring doesn't pick up until well after an economic recovery is under way. The total number of people remaining on the jobless benefit rolls rose 172,000, topping 6 million for the first time, the Labor Department said. That's the highest on records dating from 1967. The figures for continuing claims lag behind initial claims by one week. An additional 2.1 million people were receiving benefits under an extended unemployment compensation program enacted by Congress last year, the department said, as of March 28, the latest data available. That provides an additional 20 to 33 weeks, on top of the 26 weeks typically provided by the states. The Labor Department said earlier this month that companies cut a net total of 663,000 jobs in March, sending the unemployment rate up to 8.5 percent, the highest in 25 years. The Federal Reserve expects the unemployment rate will probably "rise more steeply into early next year before flattening out at a high level over the rest of the year," according to minutes from the central bank's March meeting released this month. Many private economists expect the rate to hit 10 percent by year's end. Separately, the International Monetary Fund said Thursday that the global downturn is likely to last longer than typical recessions, followed by a weaker-than-average recovery. The IMF noted that economic recessions usually are short and recoveries strong. But recessions that are global and associated with financial crises have typically been severe and prolonged, with sluggish recoveries.
