Jobs claim number
Interview: National City Corp.---Dekaser, Richard---Economist
>> welcome back. turning to the economy now, durable good orders jumped last month, suggesting a pickup in manufacturing. the 2.5% increase was the biggest since october of last year and a full percentage point higher than economists had forecast. if you back out transportation equipment,s the so-called core rate unexpectedly fell .3%. that was the first drop since november. sales of new homes rose to an annualized pace of 1.16 million. that is the third fastest pace ever. the lowest borrowing costs in four decades have supported home construction. well, weekly jobless claims number, of course, coming out tomorrow as it does every thursday and our next guest sees the labor market improving. he is going to tell us why. richard dekaiser, chief economist at national city joins us now from the firm in cleveland. thank you for joining us. let’s talk about this jobs claim number coming out tomorrow. the forecast, our average, our median estimate is for 340,000. that would be a little bit up from the prior week. what number are you looking for or do you really care that much about the weekly number and you want to look at that three, four-week moving average?
>> well, i do look at the moving afternoons. i think we’re likely as the consensus view to come up a little bit because we were basically at a three-year low in the last weekly reading. but the important point to focus on here is we’ve been seeing the four-week trend moving downwards for months now and i do think that we’re going to move into a four-week range closer to 325,000 as we go into the months of april and then into may. and the reason why, really here is strongly basing my view on what have been very, very strong survey results. the challenger group, which tabulates layoff announcements in february should haved the lowest level of layoffs in about 18 months and if you look at the past two months, the lowest level in three years. conversely, if you are looking at hiring surveys like groups such as the manpower organization, their survey for the second quarter shows the highest reading also in three years. now c.e.o.s have been sort of the laggardses. the economy has been pick up, but it has been their reluctance to buy into this expansion. that’s really been a big factor weighing on the job markets thus far. all of these surveys tell me now that c.e.o.s are becoming increasingly confident in the economy’s future and, hence r starting to hire on that.
>> let’s talk about the home sales. we had new home sales today, the third best number we’ve ever seen there, just astronomical strength there, 1.16 million new houses being built. that’s a lot of houses. but also tomorrow, we’re going to get existing home sales, an annualized pace there, also way up, 6.12 million is the forecast. again a lot of homes, down certainly from that blip that we saw. but well, well above a 10-year average.
>> oh, huge. yeah. the housing market just will not die and i think we have the mortgage market to help to thank for that with mortgage interest rates at these 40-year lows and staying there for a consistent period of time. but, in fact, we might even be looking forward to a better spring than we’ve seen as of late. if you look at applications for home purchases, january of this year was the best month ever and march with only three weeks in so far is shaping up to be the best month―the second best month ever. so, it looks like application volumes remain very high and that is a good predictor of where sales are going going forward. so, i’m in agreement with the view that we’ll see 6.1 or 6.12 million, somewhere around there existing home sales at an annual rate for the february results. but the more important factor is that this is not a market that is about to die and it’s got legses into q2.
>> what do you think about mortgage rates? a lot of people believe that mortgage rates are going to, you know, they rise that that could really slow down buying. however, others would say, you know, if you’re saving up, you are going to buy a house particularly first time buyers or the first upgrades buyer, you’re going to buy. you know, you’d sure like lower rate, but there may not be that rate sense tism
>> well, actually i do think the fundamentals argue for a weaker housing market if we see interest rates move up. we have had literally three consecutive recordses in 2001, 2002, and 2003. we have the highest homeownership rate ever in u.s. history. there is not a lot of net demand for home―for housing going forward. so, if you start to see interest rates come up, that will make affordability impaired and in my opinion, we’ll see volumes in demand decline. there is one exception here and you kind of hit on that in your own remarks, which is to say that there’s a bubble aspect which could get legs of its own as we go into the balance of this year, which is to say simply that when prices are -- have been rising for as long and as hard as they have been there becomes a psychological element that they’re going to continue and this is a no-lose kind of proposition. so, that’s my concern is that if we see sales continue to persist at very elevated levels, even if interest rates move up, it is probably not a healthy thing. so, i think still the better bet is the that economic fundamentals will prevail and that tells me that when rates move up and that’s still an open bet, but when that happens in all likelihood before the second half of the year, we will see demand trickle down accordingly.
>> excellent. a perfect wrapup there, giving me the rate forecast right in there in your closing sentence. richard decazer, a pro and guest of our show. thank you very much, chief economist at national city in cleveland. still to come, the proposal of a package is needed to come. we’ll look at the chance of it getting through the senate.
