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Jobs, housing dim economic picture

Associated Press / June 24, 2011

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WASHINGTON — Sour reports yesterday on the number of people who sought unemployment benefits and buyers of new homes illustrate what Federal Reserve chairman Ben Bernanke acknowledged Wednesday: Many factors weighing on the economy are proving to be more chronic than first imagined.

The number of applications for unemployment benefits rose to a seasonally adjusted 429,000 last week, the Labor Department said. It was the biggest jump in a month and marked the 11th straight week applications have been above 400,000.

New-home sales fell in May to a seasonally adjusted annual rate of 319,000, the Commerce Department said, far below the 700,000 homes per year economists say must be sold to sustain a healthy market. Sales of new homes have fallen 18 percent in the two years since the recession ended. Last year was the worst for new-home sales on records dating back 50 years.

“We have had a worrisome string of soft numbers, which is painting a fairly bleak picture of the recovery,’’ said Sal Guatieri, an economist at BMO Capital Markets. “The labor market is weakening . . . confidence appears to be slipping among households and small businesses, and home sales are still very depressed.’’

The Fed cut its economic growth forecast to between 2.7 percent and 2.9 percent this year, down from 3.1 percent to 3.3 percent, and raised its unemployment estimate slightly, saying it would not fall below 8.6 percent this year.