Sour reports Thursday 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.
Applications for unemployment benefits rose to a seasonally adjusted 429,000 last week, the Labor Department said Thursday. It was the biggest jump in a month and marked the 11th straight week that applications have been above 400,000. Elevated unemployment benefit claims signal a worsening job market.
New-home sales fell in May to a seasonally adjusted annual rate of 319,000, the Commerce Department said. That's far below the 700,000 homes per year that economists say must be sold to sustain a healthy housing 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 half a century.
The Fed cut its economic growth forecast to between 2.7 percent and 2.9 percent this year, down from its range of 3.1 percent to 3.3 percent in April. The Fed also raised its unemployment rate estimate slightly, saying it would not fall below 8.6 percent this year.
Economists say they are worried by potential conflicting explanations for the more downbeat view.
The White House is trying to avoid further unexpected setbacks to the economy. The Obama administration announced Thursday it was releasing 30 million barrels of oil from the country's emergency reserve, the largest ever. It is intended to increase U.S. supplies during the busy summer driving season and will likely send the cost of gas, which has already been falling, down further.
Another 27 nations said they would release a combined 30 million gallons. Together, that would add an extra 60 million gallons of oil to the world's supply. American motorists use about that much in just three days.
What would help the economy most are jobs, analysts say. But according to an Associated Press Economy survey last week, the nation will add only about 1.9 million jobs this year and the unemployment rate will fall to only 8.7 percent by the end of the year.
Unemployment applications fell as low as 375,000 in February, a level that signals sustainable job growth. But applications surged in April to an eight-month high of 478,000 and have shown only modest improvement since that time.
The four-week average for unemployment benefit applications, a less volatile measure, was unchanged last week at 426,250.
"We need initial claims to fall back below 400,000 to signal stronger economic growth than the area we seem to be mired in," said analysts John Ryding and Conrad DeQuadros at RDQ.