Sales of previously owned US homes hit a three-month low in June while new claims for jobless benefits surged last week, the latest indications that the economy is on the ropes. Another report on Thursday showed an index of leading indicators, a gauge of the economy's future prospects, fell last month, consistent with views the recovery was cooling and the slowdown could persist through the end of the year.
With the data stream continuing to be weak, fears have escalated that the economy may be slipping back into recession, but both private economists and Federal Reserve officials see the recovery still intact. "The soft patch continues. We are above stall speed now and losing momentum," said Robert Dye, a senior economist at PNC Financial Services in Pittsburgh. "If we get too close to stall speed for too long, we are likely to fall below that and that's where the risk of a double-dip recession comes in."
Existing home sales fell 5.1 percent to an annual rate of 5.37 million units, the National Association of Realtors said, but better than market expectations. The median home sales price in June was $183,700, a 1 percent increase from the prior year. A separate report from the Labour Department showed initial claims for state unemployment benefits rose 37,000 to 464,000 last week, more than erasing a decline in the prior week. The rise exceeded market expectations for a reading of 445,000.
Job growth in the United States has slowed after strong gains early in the year, crimping household spending and holding back the economy's recovery from the most painful recession since the 1930s. In congressional testimony on Wednesday and Thursday, Fed Chairman Ben Bernanke described the outlook as "unusually uncertain" and said the US central bank stood ready to take further steps to aid the economy if needed.
"We are ready and we will act if the economy does not continue to improve if we do not see the kind of improvements in the labour market that we are hoping for and expecting," he told the House of Representatives Financial Services Committee on Thursday.
However, Bernanke said the US central bank did not expect the economy to stall, remarks that were echoed by New York Federal Reserve Bank President William Dudley. The claims report covered the survey week for government's closely monitored employment report for July, which is scheduled for release on August 6. A third report on Thursday showed the Conference Board's index of leading economic indicators slipped 0.2 percent in June after rising 0.5 percent in May.
While the number of people still receiving unemployment benefits after an initial week of aid dropped sharply to 4.49 million in the week ended July 10, it likely reflected people falling off the benefit rolls rather than finding work. Similarly, the number of people on emergency benefits tumbled to 3.48 million in the week ended July 3, but the figure is set to rise in coming weeks after the Senate finally voted late on Wednesday to extend benefits for the long-term unemployed.
Some 2.5 million unemployed Americans have seen their benefits lapse since the end of May as the Senate was deadlocked over how to cover the $34 billion cost of extending them through November. According to Labour Department data, about 45 percent of the 14.6 million people unemployed in June had been out of work for six months or more.