New-home sales fall 9.5%, biggest drop since April 1997 !!
May 24, 2001
Jobless Claims Rise by 15, 000
By THE ASSOCIATED PRESS
Filed at 10:18 a.m. ET
WASHINGTON (AP) -- Sales of new homes in April posted the largest decline in four years as rising layoffs and job uncertainties made Americans feel less inclined to make a big-ticket purchase.
New-home sales fell by 9.5 percent to a seasonally adjusted annual rate of 894,000, the biggest drop since April 1997, the Commerce Department reported Thursday.
Importantly, April's figure in part reflects a change in the government's methodology for calculating new-home sales. That change resulted in monthly sales numbers being revised downward. Thursday's report was the first to use the new calculation, which no longer takes into account new homes under construction before permits were issued. The old system had the effect of boosting sales figures.
Analysts had expected a decline in new-home sales, since the slowing economy is taking its toll on the labor market.
In March, sales rose 2.3 percent to a rate of 988,000, according to revised figures, reflecting in part the new methodology. The government previously reported that the level of sales had reached a record monthly rate of 1.02 million.
Seeking to hold off recession, the Federal Reserve has cut interest rates five time this year, totaling 2.5 percentage points. The rate cuts lower borrowing costs and are designed to encourage spending by consumers and investment by businesses, which would stoke economic growth.
In another report, new claims for state unemployment insurance rose sharply last week, fresh evidence the weakening economy is making it harder for workers to hold onto their jobs.
The number of workers filing new claims for jobless benefits jumped by a bigger-than-expected 15,000 to a seasonally adjusted 407,000 for the work week ending May 19, the Labor Department said. That was the highest level since April 28.
The more stable four-week moving average of claims, which smoothes out week-to-week fluctuations, however, slipped to 403,000 last week, the lowest level since April 21.
The economic slowdown that has gripped the country since the second half of last year has forced companies to cut production and jobs because of slumping demand. Manufacturing has been the hardest hit by the slowdown, while housing and construction have generally held up well.
Even with last month's decline in new-home sales, the housing market remains healthy, helped out by low mortgage rates.
In April, the average rate on a 30-year fixed-rate mortgage was 7.07 percent, down form 8.20 percent in April 2000. Last week, the rate stood at 7.14 percent.
By region, sales in the Northeast fell by 6.3 percent to an annual rate of 75,000 in April. In the Midwest, they declined by 10.9 percent to a rate of 164,000. In the South they fell by 13.1 percent to a rate of 437,000 and in the West sales slipped by 1.4 percent to a rate of 218,000.
The nation's unemployment rate jumped to 4.5 percent in April, a 0.2 percentage-point increase from March. Economists worry that if the unemployment rate were to rapidly rise, that could force consumers -- a main force keeping the economy afloat -- to sharply cut spending and tip the country into recession. |
