Two cornerstones of the economy, jobs and housing, sank to new depths Thursday, with unemployment claims bolting higher and home prices recording one of their steepest drops.
The bleak reports underscored the self-reinforcing cycle hampering the economy: As home prices sink, foreclosures rise, banks feel pressure to shy away from lending and employers cut jobs.
The Labor Department said the number of newly laid-off people filing for unemployment benefits rose to 406,000 last week. The last time jobless claims were higher was after the Gulf Coast hurricanes in 2005.
The housing news wasn't any better: As sales of previously owned homes fell in June coupled with a glut of unsold and foreclosed homes on the market, the value of Americans' biggest asset continued to sag.
The median price for a home sold in June was $215,100, a drop of more than 6 percent from a year earlier and the fifth-largest year-to-year price drop on record, the National Association of Realtors said. Sales of previously owned homes fell 2.6 percent, to an annualized rate of 4.86 million.
With companies laying off workers and new jobs hard to find, the ranks of new homebuyers could shrivel further, spelling more trouble ahead for the housing market and economy. Consumer spending, the lifeblood of the economy, is further in jeopardy.
”If you don't have a job or are concerned about keeping your job, you are not going to rush out to buy anything — let alone a home,“ said Richard Yamarone, economist at Argus Research.
Rising mortgage rates are also adding to the headaches. Rates on 30-year mortgages zoomed to 6.63 percent this week, the highest in nearly a year.