U.S. Initial Unemployment Insurance Claims Shoot Back Up

Initial claims for unemployment insurance shot higher last week to 406,000. The latest level compared to an upwardly revised 372,000 during the prior week. It reached a level not seen since this past March which was the highest point since mid-2005. The latest weekly surge surpassed Consensus expectations for a rise to 380,000 claims.

As a result of the latest weekly jump in initial claims the four-week moving average increased, but just modestly, to 382,500 (23.1% y/y). During June claims averaged 391,000.

A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment. Over the longer period of time, the level of claims for jobless insurance has not trended higher with the size of the labor force due to a higher proportion of self-employed workers who are not eligible for benefits.

Initial claims claims for jobless insurance in California are up 34.7% y/y. They also are up 46.0% in New York and by 55.1% in Ohio. In Massachusetts the gain in claims moderated to 10.7% and in Michigan the rise fell to 8.2% after the doubling this past May. In Pennsylvania claims fell 12.1% from last year.

Continuing claims for unemployment insurance during the latest week fell by 9,000 following a little-revised 87,000 worker decline during the prior week. The four-week moving average of continuing claims slipped slightly but remained near the cycle high of 3,142,750. That was roughly a quarter higher than a year ago and the highest level since early 2004.

Continuing claims provide some indication of workers' ability to find employment and they lag the initial claims figures by one week.

The insured rate of unemployment was unchanged at 2.3%.

The Congressional Budget Office's Cost Estimate of the Foreclosure Prevention Act of 2008 can be found here.

For June the level of existing homes fell 2.6% to 4.86 million, reported the National Association of Realtors. The decline reversed all of a 2.0% increase during May and it was to a new low for this cycle. The figure was weaker than the expected selling rate of 4.94M homes. Total sales include sales of condos and co-ops.

Sales of existing single-family homes fell a larger 3.2%. These sales (which have a longer history than the total) were at the lowest level since early-1998.

By region, home sales in the West rose for the fourth straight month and they were up 17.0% from the October '07 low. Elsewhere, sales in the Northeast reversed the increases of the prior four months. In the Midwest total sales fell to near the low for this cycle but sales of single-family homes were at the lowest level since 1997. Sales down South fell to the lowest level since 2000.

Median home prices repeated their May increase and rose 3.5%. Prices were up 10.0% from the February low after a 33% three-month rate of decline in October. However, prices typically firm in the Spring.

The number of unsold homes (condos & single-family) on the market was roughly unchanged m/m (+2.8% y/y). At the current sales rate the inventory rose slightly to an 11.1 months supply which is about the record high for this series. For single-family homes there also was an 11.0 months supply at the current sales rate which was the highest supply since 1985.

The Fed's latest Beige Book which covers regional economic conditions can be found here.

There is little let up in the pace of the drop in the Euro Area MFG and services PMIs. Indeed their rate of decline has picked up pace. The services PMI has been in existence for 31 months and it is at its lowest level since its inception. The MFG is at its lowest level for that period as well.

The MFG index has been in existence much longer. And for that longer period back to 1996 it stands in the 26th percentile of its range - a low reading.

Except for January of this year when the services index fell very sharply, the past two months represent the fastest six month rate of decline for the services index. For MFG the July decline is the fastest six month decline in this cycle. This suggests that the downward pressure on the Euro Area economies is becoming more intense.