US Initial Claims Slow: Existing Home Sales Plunge

The US data released on Thursday were a mixed bag, with data for May showing some signs of recovery, but April data reminding us of how far things slipped in the first month of the shutdown.

The level of initial claims continued to slip in the May 16 employment survey week, putting it below the level in the middle of April, but shows that even two months into the COVID-19 pandemic there is still a significant level of filings.

The Labor Department reported Thursday that initial claims fell by 249,000 to 2.438 million in the current week, above the 2.375 million level expected, but following a sharp downward revision to the previous week’s level. The current week’s level is well below the 4.442 million level in the April 18 employment survey week.

The total number of unadjusted new claims filed since the start of the COVID-related shutdowns nine weeks ago has reached 35.3 million.

Unadjusted claims fell by 182,265 in the current week on declines in most states, but claims in New York rose by 27,102.

The Labor Department reported that 2,226,991 workers filed under Federal Pandemic Unemployment Assistance on an unadjusted basis, up 1,376,737 from the 850,184 reported in the previous week.

Continuing claims, those already receiving benefits, rose by 2.525 million to a record 25.073 million in May 9 week, lifting the insured rate to 17.2% from 15.5% in the previous week.

Also released at the same time, the Philadelphia Fed’s manufacturing index rose to a reading of -43.1 in May from -56.6 in April, in line with the partial rebound in the New York Fed region’s Empire State index released last week.

In the Philadelphia Fed region, there were improvements in new orders, shipments and employment readings, though all still indicate significant contraction.

The reading for prices paid rebounded back above the breakeven point, likely due to supply concerns, while inventories turned positive. The six-month outlook also increased further, suggesting a strong recovery by the end of the year. Other regional conditions data will all be released next week.

The flash Markit readings released later in the morning were in line with the Empire and Philadelphia Fed measures, pointing to modest improvement after sharp April declines. Both manufacturing and services conditions posted increases but continued to signal contraction.

Released later Thursday, existing home sales fell further in April, declining by 17.8% to a 4.33 million annual rate, as expected, after dipping to 5.27 million in March. The April pace was the slowest since 3.45 million in July 2010.

Sales of single-family homes fell by 16.9%, while condo sales plunged by 26.4%. There were sales declines in all four regions of the country.

This month’s data reflect the full impact of social distancing on March contract signings that translate into April sales. The National Association of Realtors reported on April 28 that their Pending Home Sales Index, a predictor of existing home sales, fell by 20.8% in March.

Even as some home showings were conducted online, prospective buyers were reluctant to commit to a purchase with the current level of uncertainty. And it will be hard to convince current homeowners to upgrade in the current environment.

Inventories of homes for sales fell by 1.3% in April. When combined with the sales drop, the month’s supply rose to 4.1 months from 3.4 months in March. The level inventory was down 19.7% from its level a year ago.

New home construction fell sharply in April, based on data released on Tuesday. With fewer new homes to trade up to and reluctance of some homeowners to sell, inventory of existing homes for sale will remain depressed.

At the same time, however, sale prices of existing homes moved higher in April, as the market for homes remains brisk even as the number of sales has declined. NAR said that 56% of sales have occurred less than a month after their posting.

National Association of Realtors Chief Economist Lawrence Yun said that even with social distancing, homes that have been put on the market continue to attract buyers and boost prices.

Finally, the Conference Board’s leading index fell by 4.4% in April, ahead of the 5.9% decline expected, but following a downward revised 7.4% decline in the previous month.

As expected, the largest single factors in the decline were rising jobs claims and a drastically shorter factory workweek. Those two components combined accounted for 3.3 percentage point of the 4.4 percentage point drop in the month.

Other large negative factors were lower building permits and the dip in the ISM new orders index, but stock prices recovered in April after a sharp decline in March. The Coincident index fell by 8.9% in the month on the sharp contraction in nonfarm payrolls and the decline in industrial production.

Kevin Kastner


Colin Lambert

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