The recent run of bad economic figures continued Thursday, as new jobless claims reached a six-month high, Wall Street lost more ground, several companies released disappointing earnings reports and the foreclosure rate rose for the eighth month in a row.
With such gloomy numbers coming on the heels of a pessimistic Federal Reserve statement this week — and declines in U.S. exports and more grim economic news from Europe — fears among economists are growing that continuing high joblessness may lead to a “double-dip” recession.
The Labor Department reported Thursday that last week’s “advance figure for seasonally adjusted initial claims was 484,000, an increase of 2,000 from the previous week’s revised figure of 482,000. The 4-week moving average was 473,500, an increase of 14,250 from the previous week’s revised average of 459,250.”
Although the immediate increase of 2,000 was modest, economists had been expecting the number of new benefit claims to fall. Also the “moving” figure, which every week takes the average of the previous four weeks and is thus considered a more reliable number, showed a much larger and also unexpected increase.
“Claims’ failure to move lower in the latest week was a disappointment and could point to further labor market weakness,” said Andrew Gledhill of Moody’s Economy.com. In a note to Decision Economics clients, economist Pierre Ellis said the Labor statistics “represents a very adverse turn in the labor market, threatening income growth and consumer spending.”
The continuing poor jobless numbers also are becoming an increasing political problem for the Obama administration. Rep. John Yarmuth, Kentucky Democrat, took aim at “a sense of floundering and indecisiveness” in the administration’s efforts to combat these unmoving jobs numbers.
“I’m not real happy with our economic team in the White House,” Mr. Yarmuth, an Obama supporter, said in a Louisville, Ky., speech to union activists. “They think it’s more important that Goldman Sachs make money than that you make money.”
Although Mr. Yarmuth freely bashed Republicans as well, he accused the Obama administration’s inner circle of being too centered on Wall Street.
“When [Treasury Secretary] Tim Geithner and [National Economic Council Director] Larry Summers talk about the economy, it’s like it doesn’t involve real people,” he told the Associated Press in an interview after the speech.
Not that Wall Street has had such a great week.
The Dow Jones industrial average fell 58 points to close at 10,319. The Standard & Poor’s 500 index ended the day at 1,083, a loss of 5 points, and the Nasdaq composite index slipped 18 points to 2,190. While Thursday’s losses of less than 1 percent were not overwhelming, they come on top of losses of 2.5 percent to 3 percent Wednesday and continued a weeklong losing streak.
Besides the jobless-claims numbers, the biggest hit on Wall Street was a report from Cisco Systems Inc. that its second-quarter revenue and future-revenue forecast both failed to meet analysts’ expectations. Cisco shares lost almost 10 percent and other technology stocks also fell. Other such “Main Street” staples as food seller Sara Lee Corp. and retailer Kohl’s Corp. released disappointing numbers or predictions.
“Theres renewed fear about the economic recovery rolling into a double-dip” recession, Henry Smith, chief investment officer at Haverford Trust Co., told Bloomberg news. “We had Ciscos comments about the second half and we had jobless claims rising when we expected a fall. All of this is weighing on investors concern about whether the recovery can transition into a sustainable expansion.”
About the only good economic news Thursday came from General Motors Co., which announced second-quarter profits of $1.33 billion, a sign of the company’s health sufficient for Chief Executive Officer Ed Whitacre to pronounce his tenure a success and say he will step down next month. However, GM is largely government-owned and hopes to be able soon to sell stock to the public, and so its optimism did not affect the broader markets.
Meanwhile Thursday, the foreclosure listing company RealtyTrac said mortgage lenders repossessed 92,858 properties in July, an increase of 9 percent over June, an increase of 6 percent over the previous July and the second-highest monthly total. The July numbers mark the eighth month in a row that final repossession figures have increased over the same month in the previous year.
The July numbers for overall foreclosure activities - which also include default notices and scheduled auctions - weren’t quite so bad, the 325,229 figure increasing over the June numbers but declining compared with July 2009. But those levels are still are historically high.
“July marked the 17th consecutive month with a foreclosure activity total exceeding 300,000,” said James J. Saccacio, chief executive officer of RealtyTrac. “Declines in new default notices, which were down on a year-over-year basis for the sixth straight month in July, have been offset by near-record levels of bank repossessions, which increased on a year-over-year basis for the eighth straight month.”
Overall for the year, RealtyTrac estimates final home seizures to top 1 million U.S. households.
Those numbers haunted even the good news on interest rates in recent days — Freddie Mac announced Thursday that 30-year fixed-rate mortgages averaged 4.44 percent this week — as the interest declines reflect economic uncertainty and highlight a continuing grim housing market even with cheap mortgage rates.
Across the Atlantic, economic numbers released by the EU statistics office Eurostat on Thursday showed surprising weakness, with industrial production in the 16-nation eurozone declining 0.1 percent in June versus May, a major dropoff from May’s healthy 1.1 percent increase and a failure to meet consensus expectations of a 0.6 percent rise.
The eurozone nations are scheduled Friday to release figures on second-quarter economic growth. Although the numbers are expected to be better than the anemic 0.2 percent growth achieved in the first quarter, Thursday’s numbers left analysts worried, since Eurostat also has reported weak numbers on consumer behavior, saying retail spending remained flat in June after rising slightly in May.
On Tuesday, Federal Reserve officials made clear that they fear a further slowdown, and singled out the jobs field as a particular cause for concern, saying “employers remain reluctant to add to payrolls.”
In their statement, the Fed members declared that the recovery’s pace “has slowed in recent months” and is “likely to be more modest in the near term than had been anticipated.”
The grim economic statistics continued Wednesday, with the U.S. trade deficit in June increasing by $7.9 billion — a monthly record — to $49.9 billion. The deficit was the largest in almost two years and was accompanied by a rare absolute decline in the value of U.S. exports.
In a sign that consumers remain spooked — and therefore less likely to spend or borrow and help stimulate the economy — an NBC/Wall Street Journal poll released Wednesday said 64 percent of Americans think the economy will get worse and has yet to reach its low point, compared with 53 percent who expressed that sentiment in January.
*This article is based in part on wire service reports.
• Victor Morton can be reached at email@example.com.
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