Economist's Commentary: May 1, 2008

Quick Take on the Economy: May 1, 2008

By Lawrence Yun, NAR Chief Economist

The first-time jobless claims rose measurably in the latest week to 380,000 (compared to 345,000 one week ago).
The continuing jobless claims (which counts those who have not found jobs and are continuing to get insurance checks) also increased by 74,000 — now surpassing the 3 million mark.
Notable changes were observed in some states. More first-time claims came from Connecticut, Texas, and Rhode Island. Far fewer first-time claimers in Michigan, California, and North Carolina.
The numbers continue to point toward increased unemployment rate. The current jobless figures are rising but do not match the levels of the last recession in 2001.

Aggregate personal income in the country rose 0.3 percent in March. That puts income in the first quarter higher by 4.4 percent from a year ago (an improvement from the prior quarter).
After taxes, disposable income grew 5.0 percent from a year ago (an improvement from 4.1 percent in the prior quarter).
Aggregate personal consumption rose by 0.2 percent in March. That puts spending in the first quarter higher by 4.5 percent from a year ago (though a deceleration from 6.3 percent growth in the prior quarter).
Even after adjusting for inflation, both income and spending rose. This is consistent with slow economic expansion, but not a recession.

The index of Institute of Supply Management — which is one of the most timely information sources (this data is for April) clocked at 48.6. The figure is unchanged from the month before.
The below 50 reading implies contraction in the manufacturing sector, but not necessarily for the overall economy. Historically, a reading below 47 on a consistent basis is associated with recessionary conditions.

We have anemic economic expansion right now. But it is an expansion and not a contraction. Unfortunately, slow economic growth generally results in several months of job losses.
The economy is expected to be much better in the second half. The tax rebate checks will provide a nice boost to income and spending.

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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