ZUMA Press Inc
(2009-01-21 05:14:12)
US unemployment claims hit a 26-year high and home building fell to half-century lows, data showed Thursday, highlighting the scale of the recession facing the new Obama administration.
President Barack Obama has made economic recovery his administration's top immediate priority and is seeking an 825-billion-dollar stimulus package from Congress to kick-start growth.
On Obama's second full day in office, the administration announced the Democratic president will have a daily economic crisis briefing in addition to the daily intelligence briefing.
"He felt it was important that each day he received the most up-to-date information as it relates to the economy," said White House spokesman Robert Gibbs.
Government data revealed the challenges in two of the worst-hit areas: the labor market and the collapsed housing sector, the epicenter of the global credit squeeze that erupted in August 2007.
The Labor Department reported the number of initial unemployment claims in the week ended January 17 soared to 589,000, matching a late December weekly level that was the highest since November 1982.
"The labor market remains a disaster," said Ian Shepherdson, chief US economist at High Frequency Economics.
"It is clear from the latest numbers that the underlying trend in claims is still upwards and we have no hope that the peak is anywhere near. The corporate sector is rolling over, and we probably have not yet seen many job losses stemming from the sudden collapse in international trade."
The economy had capped a full year of deepening recession in December with a total loss of 2.6 million jobs and unemployment at a 16-year high of 7.2 percent.
Rising job losses and fears of layoffs have significantly damaged consumer confidence, leading worried consumers to curb the spending that normally drives two-thirds of US economic activity.
Software giant Microsoft on Thursday became the latest major employer to reduce headcount, announcing up to 5,000 jobs would be slashed "in light of the further deterioration of global economic conditions."
The Commerce Department reported housing construction starts and building permits tumbled in December, raising alarms about the continued freefall in real estate, a pillar of the US economy.
The number of housing starts plunged 15.5 percent in December from November to an annualized rate of 550,000 units.
It was the third consecutive monthly drop in starts as home builders retrenched in the face of rising unemployment, tight financing conditions and a glut of unsold inventory.
Permits to build new homes, an indicator of future activity, dropped 10.7 percent from the prior month to an annual rate of 549,000.
The sharp drop in housing starts outstripped analysts' consensus expectation of 610,000, while the permits decline was not as bad as the 615,000 forecasted.
The December numbers were the lowest on record: Housing starts data were first published in January 1959, and permits data in January 1960.
"To put the December construction number into perspective, it is over 30 percent lower than the weakest home start pace posted in any other slowdown over the past 50 years. It is a number that is almost incomprehensible," said Joel Naroff at Naroff Economic Advisors.
IHS Global Insight's Patrick Newport said the report "points to further double-digit drops in starts during both January and February."
"Conditions in the market for new homes have not been this bad since the 1930s, and they continue to worsen," he added.
Copyright 2009  AFP Global Edition
