Economist's Commentary: October 9, 2008

Quick Take on the Economy: October 8, 2008

By Lawrence Yun, NAR Chief Economist

The number of people filing for unemployment checks for the first time fell by 20,000 last week, but remains very elevated at 478,000. Normal, non-recessionary times would yield only about 350,000 new filers each week.
The total receiving checks, including continuing claimants, is now 3.66 million. Normal times would yield about 2.5 million.
A very high number of first-time filers and continuing recipients mean near certain contraction in economic activity.

Wholesale sales fell in August by 1.0 percent. Sales of lumber and construction related items fell 5.2 percent. Even the sale of beer and alcoholic beverages fell in August - somewhat surprising given that beer consumption tends to rise during economic hard times.
Lower sales resulted in inventory build-up. The wholesale inventory-to-sales ratio inched up to 1.10 from 1.08 in the previous month. Despite the increase, the inventory-to-sales ratio is still below last year's level.
The demand for warehouse spaces could hold steady and not meaningfully fall as firms may need more space to put away inventory.

Retail sales have been weak and now we are getting weaker wholesale activity. Penny-pinching consumers will cause the overall economy to contract at least through the first quarter of 2009.
Commercial real estate deals are being held up because of credit unavailability despite decent fundamentals on inventory-to-sales figures.
Weak consumer spending does necessarily mean potential homebuyers will sit out. Past recessions have shown that consumer do buy homes even as they contract spending in other areas if housing affordability is favorable.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

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