The Week in Review: Weak Housing, Manufacturing, Retail Data

Several signs of weak demand in the American economy appeared this week, and the bad news was compounded by an increase in jobless claims.  While Americans are buying less goods and services, especially less houses, Americans are also struggling to find and keep jobs. Initial jobless claims rose 6,000 to reach 265,000 this week, according to the Department of Labor, while continuing jobless claims fell slightly to 2.18 million.

Several signs of weak demand in the American economy appeared this week, and the bad news was compounded by an increase in jobless claims.  While Americans are buying less goods and services, especially less houses, Americans are also struggling to find and keep jobs. Initial jobless claims rose 6,000 to reach 265,000 this week, according to the Department of Labor, while continuing jobless claims fell slightly to 2.18 million.

The fall in claims is partly a result of the limited time that Americans can claim benefits, and the longer time it is taking Americans to find work.

In addition to rising joblessness, stagnant wages and rising prices have also discouraged Americans from making major purchases. This is especially clear in data released this week on the housing market. According to the National Association of Realtors, existing home sales fell 7.1% in February, a stark decline that analysts were not expecting.

While NAR Chief Economist Lawrence Yun noted, “finding the right property at an affordable price is burdening many potential buyers,” the group saw home prices rising at a continued pace, as supply is outstripped by demand.

Elsewhere, additional data points indicating a decline in the strength of the housing market popped up this week. The Mortgage Bankers Association noted that purchasing activity fell 1% on a year-over-year basis, with mortgage applications down 3.3% despite mortgage rates actually falling.

The trend was confirmed by a study conducted by title insurance firm First American Real Estate, which saw a 4.4% quarter-over-quarter fall in housing activity in the first 3 months of 2016.

Purchases of new homes also fell short of expectations, with new home sales up just 2% in February. Most of that growth was attributed to the Northeast, where improving weather helped bring a 38.5% increase in sales activity. In areas where weather causes less sales volatility, activity fell significantly.

New home sales were down 7.2% in the south and fell in the west, where weak economic conditions and a decline in good paying long-term employment opportunities are discouraging Americans from tying themselves to one geographical location.

In addition to weak housing, manufacturing saw only a nominal increase, as the Markit Flash PMI rose to 51.3 in February, and retail sales rose just 0.6%, according to Redbook. A study of durable goods orders and inventories saw orders for these products fall 2.8%, with transportation equipment demand down 6.2%.

The weakness in durable goods is largely a factor of economic pessimism and lower expectations of long-term demand among American consumers as low wages and poor job prospects continue to threaten their purchasing power and keep them from spending.