New jobless claims increase, new-home sales decline

Job seekers, right, get feedback on their résumés at a job fair in Southfield, Mich., this month. Applications for jobless benefits last week had their biggest jump in a month.

WASHINGTON — 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 jobless 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 a 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.

Some stocks fell after the weaker data on housing and layoffs were released. It came one day after the Fed lowered its outlook for growth and unemployment. The Dow Jones industrial average dropped nearly 60 points.

A renewed warning from the European Central Bank chief about Europe's debt crisis contributed to the day's bleak economic news. European Central Bank President Jean-Claude Trichet said the debt crisis threatens to infect banks. And an agreement by 28 countries to boost global oil supplies forced energy stocks lower.

"We have had a worrisome string of soft numbers, which is painting a fairly bleak picture of the recovery," said Sal Guatieri, senior economist at BMO Capital Markets. "The labor market is weakening, according to the jobless claims numbers, confidence appears to be slipping among households, and small businesses and home sales are still very depressed."

The Fed cut its 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, saying it would not fall below 8.6 percent this year.

Home sales and construction would normally contribute up to 1.5 percent to the U.S. economy during post-recession recoveries. In the two years since the recession officially ended, falling prices and dismal sales have subtracted an average of 0.4 percent per year from the gross domestic product.

Each new home creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.