Economy Watch: Employment Picture Improved in '11
- Mar 02, 2012
Initial unemployment claims for the week ending Feb. 25 edged down 2,000 to 351,000, according to the U.S. Department of Labor on Thursday. The four-week average, which tends to be smoother than the weekly tally, was down by 5,000, to 354,000. The downward trend points toward a potential good showing next week when monthly job numbers will be published by private sources and the government.
The unemployment claims report came on the heels of a separate report by the Bureau of Labor Statistics that noted that in all of 2011, average unemployment rates declined in 48 states, while rising in only two states and the District of Columbia. The largest annual unemployment decline came in Michigan (down 2.4 percentage points), while four other states experienced decreases of more than 1 percentage point, namely Ohio (down 1.4 points), Utah (down 1.3 points), Oregon (down 1.2 points) and Indiana (down 1.1 points).
For 2011, eight states and the District of Columbia reported unemployment rates of 10 percent or more. Nevada again had the unwanted title of the most unemployed state, posting an average unemployment rate of 13.5 percent for the year. The much larger California economy—almost as large as Italy, but bigger than Brazil, according to the World Bank—was the second-most unemployed state in 2011 at an average of 11.7 percent. At an average of 3.5 percent, the state least vexed by joblessness in 2011 was North Dakota, marking the third year in a row that the Peace Garden State has had that enviable distinction.
More homeowners now underwater
More proof that the housing market is still a long way from healthy came from CoreLogic on Thursday, when it reported that negative equity in U.S. residences—homeowners suffering underwater mortgages, that is—increased in the fourth quarter of 2011. According to the company, 11.1 million, or 22.8 percent, of all residential properties with a mortgage suffered negative equity at the end of the fourth quarter. That’s up from 10.7 million properties, or 22.1 percent, in the third quarter of 2011.
Also in the fourth quarter, another 2.5 million borrowers had less than 5 percent equity, which CoreLogic calls “near-negative equity.” Together, negative equity and near-negative equity mortgages accounted for 27.8 percent of all U.S. residential properties with a mortgage nationwide during 4Q11, up from 27.1 percent in the previous quarter. Nationally, the total mortgage debt outstanding on properties in negative equity increased from $2.7 trillion in the third quarter to $2.8 trillion in the fourth.
“The high level of negative equity and the inability to pay is the ‘double trigger’ of default, and the reason we have such a significant foreclosure pipeline,” Mark Fleming, chief economist with CoreLogic, noted in a press statement. “While the economic recovery will reduce the propensity of the inability to pay trigger, negative equity will take an extended period of time to improve, and if there is a hiccup in the economic recovery, it could mean a rise in foreclosures.”
Construction spending sees small monthly drop, large annual increase
Construction spending slipped a little in January, down 0.1 percent when compared with December, according to the U.S. Department of Commerce on Thursday. Remarkably enough, it was non-residential (and public) construction that dragged the total down, because residential spending was up 1.8 percent in January, on the heels of a 1.5 percent gain the month before. Nonresidential construction spending, however, lost 1.5 percent month-over-month.
Though the monthly numbers dipped, U.S. construction spending increased year-over-year in January 2012. In fact, at 7.1 percent in January, the annual increase was the largest since before the technical onset of the Great Recession, back at the end of 2007. The second-largest annual increase since then was in December 2011, when construction spending gained 5.7 percent.
Wall Street bumped around a good bit on Thursday—maybe some investors were paying too close attention to Ben Bernanke, who was again not talking about QE3 on Capitol Hill. In any case, the Dow Jones Industrial Average eked out a gain of 28.23 percent, or 0.22 percent. The S&P 500 and the Nasdaq also gained ground, up 0.62 percent and 0.74 percent respectively.