Economy Watch: Weekly Unemployment Drops, Less Homes Under Water, Worries from Overseas
- Jul 12, 2012
The U.S. Department of Labor reported a surprisingly large drop in the number of initial unemployment claims on Thursday. The number of claims fell 26,000 to 350,000 for the week ending July 7. The less-volatile four-week average was also down 9,750, to 376,500.
Though always welcome, the drop was more than likely due to one-time factors, such as auto factories not closing, as they often do in mid-summer, due to unusually strong U.S. demand for cars. In fact, no one is predicting a turnaround for the economy in the near term. On Thursday, billionaire investor Warren Buffett said as much on a live CNBC interview, noting that the economy is “tempered down,” and “more or less flat.”
Buffett did note that the housing market, so long the sick person of the economy, is experiencing “noticeable” improvement, though from a very low baseline. The improvement “doesn’t amount to a whole lot yet, but it’s getting better.”
U.S. Households’ Negative Equity Down
Another improvement in the housing market was reported by CoreLogic on Thursday. According to the company, 11.4 million U.S. residential properties were under water at the end of the first quarter of 2012, or 23.7 percent of the total number of properties with an outstanding mortgage. That’s down from 12.1 million properties, or 25.2 percent, at the end of the fourth quarter of 2011.
More than 700,000 households regained a positive equity position in the 1Q12, according to CoreLogic. Nationally, negative equity decreased from an aggregate of $742 billion in the fourth quarter to $691 billion in the first quarter, a fall due in large part to an improvement in house price levels.
“In the first quarter of 2012, rebounding home prices, a healthier balance of real estate supply and demand, and a slowing share of distressed sales activity helped to reduce the negative equity share,” Mark Fleming, chief economist for CoreLogic, explained in a statement. “This is a meaningful improvement that is driven by quickly improving outlooks in some of the hardest hit markets.”
Worries from Overseas
The news from China on Thursday made investors a little nervous. The Chinese government reported that the country saw annualized growth of 7.6 percent during the second quarter of 2012, the sixth straight decline in growth for the country, and the lowest level in about three years, during the worst of the worldwide recession. In recent years, China’s been experience double-digit annual growth.
Also on Thursday, Moody’s Investors Service cut Italy’s long-term bond rating from A3 to Baa2, which according to the ratings agency is “rated medium grade, with some speculative elements and moderate credit risk,” though it still counts as investment grade. Moody’s did add, however, that further downgrades are possible—and it’s only two more notches down to a speculative grade.
Wall Street had another down day on Thursday, the latest in a string of them, though not by much. The Dow Jones Industrial Average lost 31.26 points, or 0.25 percent, while the S&P 500 was off 0.5 percent and the Nasdaq declined 0.75 percent.