More Americans than forecast filed claims for jobless benefits and sales of previously owned homes unexpectedly dropped, indicating the almost three-year-old economic expansion may be moderating.
Jobless claims fell by 2,000 to 386,000 in the week ended April 14 from a revised 388,000 the prior period, Labor Department figures showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg News called for a drop to 370,000. Purchases of homes fell 2.6 percent to a 4.48 million annual rate in March, the National Association of Realtors reported in Washington.
Stocks declined as the claims data bolstered Federal Reserve concerns that growth may not be fast enough to sustain improvements in the job market that have helped push unemployment to a three-year low. Other reports today showed that an index of leading indicators rose for a sixth month and consumer confidence improved, while manufacturing in the Philadelphia area grew at a slower pace.
“The economy has slowed a notch,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who is the most accurate forecaster of existing- home sales for the two years through February, according to data compiled by Bloomberg. “We’re just not going to be able to duplicate the growth we saw in the first quarter.”
The Standard & Poor’s 500 Index fell 0.6 percent to 1,376.92 at the 4 p.m. close of trading in New York as the data overshadowed better-than-forecast earnings at Bank of America Corp. and Morgan Stanley. The yield on the 10-year Treasury note was little changed at 1.97 percent.
Other reports today offered signs of strength for the global economy.
Germany’s economy, Europe’s largest, will expand 0.9 percent this year, up from a prior estimate of 0.8 percent, four leading economic institutes, including Munich-based Ifo, said today in their twice-yearly economic outlook for Chancellor Angela Merkel’s government. The economy will grow 2 percent in 2013, they said.
Japan reported the fastest export growth in a year and a smaller-than-expected trade deficit, aiding prospects of a sustained recovery for the world’s No. 3 economy.
In the U.S., estimates for jobless claims in the Bloomberg survey ranged from 350,000 to 390,000. The Labor Department revised the previous week’s figure up from 380,000. After being revised to 370,000 from an initial estimate of 360,000, the week before that was revised back to 362,000, today’s data showed.
States are revising the figures more than usual and as of now there is no explanation for the changes, a Labor Department spokesman said. The repeated revisions may make it more difficult to determine the trend in claims.
Companies trimming their workforce include Cracker Barrel Old Country Store Inc. (CBRL:US), which runs country store-themed restaurants. The company said on April 17 that it has cut 20 positions to reduce costs, and severance and other charges may decrease third-quarter earnings by 5 cents a share.
Employers added 120,000 jobs in March, half as many as in February and the fewest in five months, according to payrolls figures released on April 6. The jobless rate fell to 8.2 percent from 8.3 percent the prior month as people left the workforce. Still, the economy has added 635,000 jobs since December.
“Recent labor market data provide an example of the uneven pattern of economic activity,” Federal Reserve Bank of Cleveland President Sandra Pianalto said in an April 16 speech in Lexington, Kentucky. “Monthly ups and downs like these make it hard to confirm the underlying pace of job creation.”
Residential real estate remains the economy’s soft spot, challenged by stricter lending standards, lower home values and the threat of more foreclosures.
Sales of existing single-family homes decreased 2.5 percent to an annual rate of 3.97 million in March. Purchases of multifamily properties, including condominiums and townhouses, fell to a 510,000 pace from 530,000.
Existing-home sales, tabulated when a contract closes, climbed to 4.26 million last year, from 4.19 million in 2010. Demand peaked at 7.1 million in 2005 during the housing boom. In 2008, sales totaled 4.1 million, the least since 1995.
There were some bright spots in the report. The median price of a previously owned home rose 2.5 percent to $163,800 from $160,600 in March 2011.
Cheaper financing is doing its part to sustain home sales. The average rate on a 30-year fixed mortgage fell to 3.88 percent last week, close to the record-low of 3.87 percent reached in February, according to Freddie Mac data.
To help hold down borrowing costs like mortgage rates, Fed policy makers last month said they will continue to swap $400 billion in short-term securities with long-term debt to lengthen the average maturity of the central bank’s holdings, a move dubbed Operation Twist. The program is scheduled to come to a close by the end of June. Policy makers next meet on April 24- 25.
Separately, the New York-based Conference Board said its gauge of the outlook for the next three to six months climbed 0.3 percent after a 0.7 percent gain in February that was the biggest in 11 months. The median forecast of economists surveyed by Bloomberg News called for a rise of 0.2 percent in March.
Manufacturing in Philadelphia
The Federal Reserve Bank of Philadelphia’s general economic index decreased to 8.5, the lowest level since January, from 12.5 in March. Economists forecast the gauge would dip to 12, according to the median estimate in a Bloomberg survey. Readings greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
Another regional report this week showed that manufacturing in the New York area expanded in April at the slowest pace in five months.
“If the regional manufacturing economies are slowing, it signals the national manufacturing economy is slowing as well,” said Neil Dutta, an economist at Bank of America in New York.
Slower economies in Europe and China may restrain exports and limit bookings to American factories, which have been the mainstay of the expansion. At the same time, a pickup in motor vehicle sales in the first quarter remains a source of strength.
Consumer confidence is holding up, another report today showed. The Bloomberg Consumer Comfort Index was minus 31.4 in the period ended April 15, compared with minus 32.8 over the previous seven days. The reading equaled that from two weeks earlier as the best since March 2008.
Gains in confidence raise the odds that consumer spending will continue to grow and benefit companies like Bed, Bath & Beyond Inc. (BBBY:US) and Toyota Corp. At the same time, five million more Americans are unemployed now than when the recession began in December 2007, showing why cheerier outlooks will be difficult to sustain.
Men, college graduates, homeowners and households earning more than $50,000 a year were among the groups for which confidence climbed last week to the highest level in four years. For those making from $50,000 to $74,999, the index jumped to the highest level since January 2008.
There was also a political element as sentiment for registered Democrats rose last week to the best level since August 2007, and that for independents climbed to the highest since December 2007. The index for Republicans last week was 38 points lower than its average dating back to 1990.
Retail sales rose more than forecast in March as Americans snapped up everything from cars and furniture to clothes and electronics. The 0.8 percent gain was almost three times as large as projected by the median forecast of economists surveyed by Bloomberg and followed a 1 percent advance in February, Commerce Department figures showed this week.
Toyota this month raised its forecast for 2012 industrywide U.S. sales of cars and light trucks, citing rising sentiment.
“We’re starting to see improvement in consumer confidence and, combined with rising fuel prices and aging vehicles, the market is starting to move,” Bob Carter, Toyota’s group vice president for U.S. sales, told reporters on April 5 at the New York auto show. “It’s happening quicker than anyone thought.”
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