Mixed News on the Economy

Bob Willis and Shobhana Chandra write in "U.S. Economy: Jobless Claims Fall, Housing Stabilizes (Update2)," for Bloomberg on April 16, 2009 report that initial claims for unemployment fell.

Initial jobless claims decreased by 53,000 to 610,000 in the week ended April 11, the fewest since January, the Labor Department said today in Washington...

Initial claims were projected to rise to 660,000, according to the median forecast of 37 economists in a Bloomberg News survey. Estimates ranged from 635,000 to 700,000.

(HT to James Hamilton of Econbrowser post, "Initial unemployment claims and the end of recessions").  In a March 28, 2009 Wall Street Journal article titled "Economy Raises Tentative Hopes a Trough Is Finally in Sight," the authors report on research by Robert J. Gordon.  The Journal writes that,

"There's growing evidence supporting the optimists' view, and I am surprised at that," said Robert J. Gordon, an economist at Northwestern University and a member of the National Bureau of Economic Research committee that is the official arbiter of when recessions begin and end. "I was sort of in the pessimists' camp until I started looking at things."

He points to one indicator in particular with a remarkable track record: the number of Americans filing new claims for unemployment benefits. In past recessions, it has hit its peak about four weeks before the economy hit a trough and began to grow again. As of right now, the four-week average of new claims hit its peak of 650,000 in the week ended March 14. Based on the model, "if there's no further rise, we're looking at a trough coming in April or May," he said, which is far earlier than most forecasts currently anticipate.

Noting the fall in initial jobless claims in a post titled, "Update on the latest economic indicators," Hamilton writes,

...new claims for unemployment compensation were reported today to have fallen by 53,000 in the week ending April 11, bringing the 4-week average down by 8,500 from what the revised numbers show to have been the recent peak the week before. If April 4 ultimately proves to be the peak for the entire year, and if this recession behaves like each of the previous 6 recessions, we could expect the NBER eventually to declare that the economic recovery began within 6 weeks of today.

The unemployment rate tends to be a lagging indicator of economic recovery.  Even though initial jobless claims fell, the current level of 610,000 is still high, suggesting that the unemployment rate will not improve in 2009. 

Willis and Chandra also report that the housing market may be bottoming out.

Total housing starts fell 11 percent to a 510,000 annual rate, lower than economists surveyed projected. The drop was led by a 29 percent plunge in work on multifamily homes, such as townhouses and apartment buildings, which fell to an annual rate of 152,000 after surging 62 percent in February.

Construction of single-family homes, the biggest part of the market, has been little changed since January...

In another sign the housing slump may be nearing a bottom, the National Association of Home Builders/Wells Fargo’s confidence index rose this month to the highest level since October, the group said yesterday. Record-low mortgage rates and falling prices started to stir demand.