Economic Reports Point to Slowing Recovery
Key reports released this week point to the economy losing steam.
Consumers are nervous about the economy despite the recent drop in fuel prices. Only 22 percent of people surveyed felt the economy was heading in the right direction in June - the lowest percentage in five months, according a Bloomberg consumer poll.
“The steady drip of dreary economic data and deteriorating labor market is reshaping public expectations,” said Bloomberg LP senior economist Joseph Brusuelas in New York.
The pace of real estate sales has slowed down after a good run earlier this year. According to the National Association of Realtors, existing home sales - which include single-family homes, townhomes, condos, and co-ops - declined 1.5 percent from April to May. The good news is that sales remain 9.6 percent higher than they were a year ago.
Three out of four regions experienced a decline in sales from April to May, with the Midwest being the only area to hold steady with a small 1 percent increase over the month. Looking from a year ago, the Midwest market is showing strength with 19.5 percent gain in sales and a median price increase roughly inline with the national median price.
The national median home price has risen 7.9 percent higher than they were in May 2011. Part of the reason is that distressed home sales, which average a 19 percent discount, are putting less downward pressure on the median home price - distressed home sales accounted for 25 percent of all sales in May compared to 31 percent at the same time last year.
Though the housing market appears to be losing momentum, there is good news for prospective home buyers - mortgage affordability just keeps getting better. The national average for a 30 year fixed rate conventional mortgage fell to an all-time low of 3.80 percent in May, down from 3.91 in April. (Record keeping began in 1971.) About a third of recent buyers are first-timers, signalling that borrowers who can make it through the tougher lending standards are taking advantage of better interest rates and low home prices.
The jobs market also look to be sputtering. The jobs forecast for June is expected to be disappointing based on initial jobless claims that have not improved and flat employment reports for April and May.
The Labor Department reported last week that the national unemployment rate was 8.2 percent in May, essentially unchanged from the previous month and only 0.8 percent lower than it was a year ago.
By state, 18 had an increase in the jobless rate from the previous month, 14 states and the District of Columbia had a decrease, and 18 states posted no change. Nevada continues to have the highest unemployment rate at 11.6 percent in May, followed by Rhode Island (11 percent) and California (10.8 percent). North Dakota again posted the lowest unemployment rate in the nation at 3 percent, followed by Nebraska at 3.9 percent.
Federal Reserve Chairman Ben Bernanke said on Wednesday in a press conference that to support a stronger economic recovery, the central bank plans to keep the federal funds rate target range between zero and 1/4 percent and expects the key interest rate to be kept low at least until late 2014.
Bernanke said the Federal Open Market Committee expects the economy to expand at a “moderate” pace over the coming quarters, dampened by high unemployment and a “depressed” housing market. The FOMC forecasts that unemployment will change little this year, and fall to 7.5 to 8 percent for 2013. The unemployment rate is expected to be in the range of 7.0 to 7.7 percent through the end of 2014.
U.S. Department of Labor
U.S. Federal Reserve Board
National Association of Realtors