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U.S. Economy Heading Into Recession

Posted September. 27, 2008 09:13,   


U.S. economic conditions have aggravated enough to start heading into recession, as new homes sales have plunged to a 17-year low.

Experts warn that the U.S. economy could rapidly cool if the aftermath of the financial crisis begins to affect the real economy.

The U.S. Commerce Department said Friday that new homes sales reached 460,000 last month, down 11.5 percent from the previous month in seasonally adjusted terms and the lowest figure since 401,000 were sold in January 1991.

The average sale price of a new house dropped 11.8 percent from July to 263,900 dollars in August.

The number of existing home sales also fell 2.2 percent to 4.91 million for the month.

The Commerce Department said the number of newly constructed homes fell 6.2 percent in August, the highest drop in 17 years.

Worse, employment has also been negatively affected by the economic downturn. The Labor Department said the number of jobless claims rose to 493,000 in the week beginning Sept. 14, up 32,000 from the week before and the highest in seven years. Experts had predicted 445,000 claims for the week.

The Labor Department said around 50,000 jobless claims alone came from Louisiana and Texas, which were hit the hardest by hurricanes Gustav and Ike.

The number of applicants for jobless benefits has surpassed the 400,000 mark for 10 straight weeks and continues to grow.

Economists say the surge in jobless claims is another sign of an economic downturn, given that the figure was 309,000 a year ago.

Consumption is also on the decrease.

The Commerce Department said orders of durable goods dropped 4.5 percent, recording a seven-month low since January, when it fell 4.7 percent.

The department blamed the decrease on falling car sales, which decreased 8.1 percent last month to set a 19-month low, and on the 38.1-percent plunge in the orders for commercial airliners.