Jobless Claims Up; Durable Goods Orders Dip
Thursday October 27, 11:18 am ET
By Martin Crutsinger, AP Economics Writer
Storm-Related Job Losses Increase, Durable Goods Orders Dip; New Home Sales Rebound
WASHINGTON (AP) -- The number of people who lost their jobs because of hurricanes Katrina and Rita has now climbed above the half-million mark with further increases expected in coming weeks from Hurricane Wilma.
The Labor Department reported Thursday that an additional 24,000 people who lost jobs because of the devastating Gulf Coast storms filed applications for unemployment benefits last week, pushing the total over the past eight weeks to 502,000 hurricane-related claims.
The weekly job losses from Katrina and Rita peaked at 108,000 in mid-September and have been trending lower since that time. However, analysts said Wilma, which hit Florida on Monday, cutting off power to millions of homes, will likely spark a renewed surge in jobless claims in coming weeks.
Meanwhile, the Commerce Department reported that sales of new homes rebounded in September after a huge decline in August. However, the median price of new homes sold last month fell by 5.7 percent, indicating that the booming housing market market may be finally beginning to slow.
New home sales rose by 2.1 percent last month to a seasonally adjusted annual rate of 1.22 million homes after having fallen by 11.6 percent in August. The median sales price, the point where half the homes sold for more and half for less, was $215,700 last month, down from $228,000 in August.
Analysts believe that rising mortgage rates will cool off the housing market in coming months and some are even concerned that there could be a sharp drop in sales and home prices in some of the nation's hottest markets.
However, they do not believe those declines will harm the overall economy in the same was as the bursting of the stock market bubble did in 2000. That sudden loss of $7 trillion in paper wealth was one of the factors leading to the 2001 recession.
In another report, the Commerce Department said that orders to U.S. factories for big-ticket durable goods fell by 2.1 percent in September as demand for civilian aircraft fell sharply. Outside the volatile transportation sector, demand for durable goods, items expected to last three or more years, was down by 1 percent.
Economists had been expecting a pullback in durable goods orders after a big 3.8 percent increase in August, but the actual 2.1 percent decline was bigger than the 1.5 percent drop they had expected.
It marked the second decline in the past three months and left demand for durable goods at a seasonally adjusted $207.03 billion in September.
The drop in September orders was skewed by a strike at aircraft giant Boeing and the Gulf Coast hurricanes, which interrupted factory operations in that region.
"There is no question that manufacturing growth has decelerated, but there still is underlying strength that will lead to a rebound early next year," predicted Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI.
The rise in September new home sales reflected strength in the Midwest, where sales were up by 24.9 percent following three months of declines. Sales also rose by 5.6 percent in the South, with government analysts saying that activity outside of the areas hit by the hurricanes offset the impact of the storms.
Sales were down 20 percent in the Northeast, after an even bigger 26.3 percent drop in August, while sales fell 11.8 percent in the West after a 20.8 percent August decline.
The 24,000 hurricane-related jobless claims last week were included in total jobless claims of 328,000. The overall figure was down from 356,000 jobless applications for the week ending Oct. 15.
Economists have been encouraged that outside of the hurricane-devastated areas, the number of layoffs has held fairly steady.
They are forecasting that overall economic activity will be reduced by as much as a full percentage point in the last half of this year but will rebound in 2006 as the billions of dollars expected to be spent on rebuilding stimulates overall growth.
The government will release its first estimate of overall economic growth for the July-September quarter on Friday. Economists are expecting the gross domestic product advanced at a respectable pace of around 3.6 percent. But before the hurricanes hit, many analysts believed GDP growth would be above 4 percent in the third quarter.
For the week ending Oct. 15, the state with the highest layoffs was North Carolina, which had an increase of 1,920 jobless applications, a rise blamed on layoffs in construction, primary metals, textiles and the furniture industries. Layoffs were up by 1,155 in Kentucky, with the increase blamed on job losses in manufacturing.