July 24, 2008 / 2:08 PM / in 9 years

Home sales at 10-year low, jobless claims jump

<p>A newly built home sits vacant with a "for sale" sign in front, in the Courtland Ridge development in Alpine, Utah, March 26, 2008. REUTERS/George Frey</p>

WASHINGTON (Reuters) - Jobless claims jumped last week and the pace of existing home sales tumbled to a 10-year low as slowing growth hit hiring and a glut of unsold homes weighed on the real estate market, data on Thursday showed.

The number of U.S. workers filing new claims for jobless benefits jumped 34,000 last week, the Labor Department said, in part reflecting seasonal volatility typical at this time of year, but also indicating that jobs were hard to find.

A separate report from the real estate industry said that home sales dropped 2.6 percent in June, dragging the annual sales pace to the lowest since early 1998.

Government bonds, which benefit from signs of economic weakness, extended gains on the data while the dollar lost ground against the euro and yen. The Dow Jones Industrial Average was down more 1 percent.

Sliding house prices and mounting losses from the subprime mortgage market sparked a credit crunch last year that has chilled growth and hiring, despite aggressive interest rate cuts by the Federal Reserve.

“The message from claims is that unemployment is still rising,” said James O‘Sullivan, economist at UBS Securities in Stamford, Connecticut.

Initial claims for state unemployment insurance benefits rose to a seasonally adjusted 406,000 in the week ended July 19, from a revised 372,000 the prior week, the Labor Department said. It was the highest reading since late March and above forecasts of 376,000 new claims.

A Labor Department official noted that estimates were being impacted by annual auto plant shutdowns, the end of the quarter, and the shorter July 4 holiday reporting week.

The four-week average of new jobless claims, a better gauge of underlying labor trends because it irons out week-to-week volatility, rose to 382,500 from 378,000.

“The average is still hanging right around that 375,000, which denotes a slow-growth economy, a pretty flat economy, not quite a recession,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco.

The number of people remaining on the benefits roll after drawing an initial week of aid declined 9,000 to a lower-then-forecast 3.107 million in the week ended July 12, the most recent week for which data is available.

Analysts estimated so-called continued claims would be 3.14 million. It was the 13th straight week that claims were above 3 million, in a sign that the slowing economy is making it harder to find jobs.

HOUSING WOE

Housing is at the heart of the U.S. slowdown and officials hope conditions will start to gradually improve once it finds a bottom, although economists warn this may still be some way off.

The pace of existing home sales in the United States fell in June to a 4.86 million-unit annual rate, according to the National Association of Realtors.

“Anecdotally, there’s a lot of foreclosed properties coming to the market. This is telling us any bottoming in the housing market will be very long and drawn out. It will take a long time for inventories to return to normal,” said Richard DeKaser, chief economist at National City Corp. in Cleveland.

Economists polled by Reuters were expecting home resales to fall to a 4.93 million-unit pace, from the 4.99 rate initially reported for May. The June rate was the lowest since a 4.83 million rate in early 1998, the Realtors said.

The inventory of homes for sale held steady at 4.49 million homes or 11.1 months of supply at the current sales pace, down only slightly from the record level of supply in April.

The median national home price declined 6.1 percent from a year ago to $215,100

In other news from the housing market, the U.S. Census Bureau said that the share of U.S. homes owned but sitting empty inched down to 2.8 percent during the second quarter from 2.9 percent in the first quarter.

Additional reporting by Patrick Rucker and Joanne Morrison in Washington, Herb Lash and Richard Leong in New York; editing by Tom Hals

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