New Jobless Claims Drop Amid Foreclosures Listings

by Donald Hanz on Foreclosure Crisis

Last week, the number of new unemployment claims dropped to its lowest level in a period of 14 weeks, according to a Labor Department report released on Thursday. This is a good sign for a country reeling from the downswing effects of foreclosure listings overloaded with properties. Some are even interpreting the decline as a sign that the pace of mass layoffs has slowed down.

Even so, the overall number of jobless Americans receiving unemployment benefits increased to another record level. The rising number of jobless Americans increased the number of homes added to foreclosure listings.

In the Labor Department report, the number of new applications for unemployment benefits last week decreased to 601,000, a big drop from the 635,000 claims analysts expected. But the overall number of people getting jobless claims increased to 6.35 million, a record level in a 14-week period.

The economic downturn, largely caused by large numbers of properties being thrown into foreclosure listings, forced companies to lay off their workers to cut costs.

Meanwhile, the four-week shifting average of new jobless claims decreased to 623,500 last week, dropping by over 30,000 from the peak in the first week of April. Economists at Goldman Sachs said that a decrease of about 30,000 to 40,000 is required to indicate a peak level.

In a related report, federal officials said that productivity increased by an adjusted yearly rate of 0.8 percent in the first quarter, higher than the 0.6 percent expected by economists.

Wage pressures, estimated from labor costs, climbed at a 3.3 percent rate, a drop from the 5.7 percent rate in the last quarter of 2008.

As companies cut labor costs by laying off workers, more homes were added to foreclosure listings.

In a report released by the Federal Reserve, consumer credit dropped in March to $2.55 trillion at a 5.2 percent adjusted yearly rate, the steepest decline since 1990. The decline rate represented $11.1 billion of consumer credit decrease.

In addition to the declining pace of new unemployment claims, consumer spending also increased in the first quarter at an adjusted yearly rate of 2.2 percent, a record high since 2007. Economists expect consumer spending to increase further as banks apply growth strategies following their stress tests and as some indications of improvement from the downturn effects of foreclosure listings begin to appear.

The Federal Reserve’s report on the decline in credit card debts and auto loans in March is a reflection of strategies by consumers to control their debts as they struggle against the harsh effects of foreclosure listings.