- The Washington Times - Thursday, September 17, 2009

Housing starts reached a nine-month peak in August as a big jump in groundbreaking for multifamily dwellings overwhelmed a slight decline in starts for single-family homes.

In a separate report, first-time claims for unemployment benefits unexpectedly declined last week, indicating that the deterioration in the labor market may be slowing as the economic recovery begins to gain traction. Federal Reserve Chairman Ben S. Bernanke said on Tuesday that the longest, deepest U.S. recession since the Great Depression “is very likely over.”

However, Mr. Bernanke cautioned that “unemployment will be slow to come down” if the recovery proceeds at the moderate pace that the Fed and other forecasters have been projecting.

New residential construction increased 1.5 percent last month to an annual rate of 598,000 homes, the Commerce Department reported Thursday. Building starts for multifamily units, such as apartments and condominiums, increased 25.2 percent in August, more than offsetting a 3 percent decline in single-family homes.

It was the first decline in single-family starts in seven months, signaling that builders may be preparing for a fall in demand after the $8,000 tax credit for first-time home buyers expires at the end of November.

The tax credit, combined with plunging home prices, has played a major role in the rising sales of new and previously owned homes in recent months. Through July, the combined sales of new and existing homes have increased four consecutive months. From the peak reached in mid-2006, the average price of existing homes has plummeted more than 30 percent, according to the S&P/Case-Shiller U.S. National Home Price Index.

Despite reaching a nine-month peak last month, housing starts in August were still 30 percent below their year-earlier level.

Groundbreaking last month was concentrated in the Northeast, where housing starts soared 24 percent compared with July starts. Housing starts were flat in the West, edged up less than 1 percent in the Midwest and declined by 2.4 percent in the South.

Residential construction, which had been plunging for more than three years, was a major factor in the steepness of the recession, but that trend now is reversing.

“Home building should make a slight contribution to second-half [economic] growth,” said Mark Vitner, senior economist at Wells Fargo. “The impact, however, may be muted by the larger share of smaller homes being built for first-time home buyers.”

In the labor market, initial claims for jobless benefits fell 12,000 to 545,000 for the week ending Sept. 12, the Labor Department reported Thursday. However, continuing claims lasting more than one week jumped by 129,000 to 6.23 million for the week ending Sept. 5.

“The gradual downward trend in initial unemployment claims over the last several months continued this past week, illustrating that the road to labor-market stability will be long,” said Andrew Gledhill, an economic analyst at Moody’s Economy.com.

For workers who exhaust their state jobless benefits, which normally last 26 weeks, the federal government finances two other programs — the Extended Benefits program and the Emergency Unemployment Compensation (EUC) program. Participation in those two programs increased by 32,000 for the week ending Aug. 29, according to the Labor Department report.

Compared with 1.5 million workers who collected EUC benefits a year ago, more than 3.1 million received benefits in late August.

The unemployment rate increased to 9.7 percent in August, and most economists project that it soon will top 10 percent. So-called “jobless recoveries” followed the last two recessions of 1990-91 and 2001, as the unemployment rate continued to rise for many months after the recessions officially ended. The 2001 recession, for example, ended in November of that year, but the unemployment rate did not peak until June 2003.

Since the latest recession began in December 2007, the economy has shed 6.9 million jobs, the most since the Great Depression, but the pace of job losses has slowed in recent months. After averaging nearly 650,000 per month from November through April, job losses averaged 315,000 during the last four months and totaled just 216,000 in August. However, economists estimate that the economy must generate about 150,000 jobs per month just to keep the unemployment rate from rising.

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