Daily Forecast Update: Unemployment Claims

July 9, 2009

By Gregg Stratton, Research Economist

Initial claims for the week of 7/04/2009 dropped below 600,000 for the first time in nearly five months.
This past week’s number of initial claims was 565,000, or 52,000 less than the previous week. This beat expectations as economists only expected a weekly decrease of 4,000.
Some of the decrease is attributable to an acceleration of auto layoffs into the spring that normally would have occurred in July.
Continuing claims increased from the previous week by 159,000 to 6.883M, and are 3.8M greater than the same week last year.

The increase in continuing claims still suggests that the labor market is very slack and that businesses are reluctant to hire new employees. Overall the national unemployment rate is 9.5% and is expected to increase to approximately 10.5% over the next year.
Although not immune from the deleterious effects of declining employment, the housing market will likely improve before unemployment begins to decrease, just as we’ve seen in previous business cycle recoveries.
NAR is forecasting that both GDP and home sales will begin to improve in the third quarter as compared to the previous year. This assumes continued improvement in the credit markets as well as gains from stimulus spending and the first-time home buyer tax credit.

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