Manufacturing orders drop, housing sales tank in October

A trio of economic indicators released today indicate that the economy may not be as rosy in the fourth quarter as even the stagnation level GDP revision announced yesterday indicates for the third quarter.  Durable goods orders declined 3.3%, a significant downturn as the US heads into its busiest retail season.  Reuters pronounces itself shocked, shocked over this development (via JWF):

New orders for long-lasting U.S. manufactured goods unexpectedly fell in October to post their largest decline in nearly two years and business capital spending plans dropped, according to a government report on Wednesday that pointed to a slowdown in factory activity.

The Commerce Department said durable goods orders tumbled 3.3 percent, the largest decline since January 2009, after surging by a revised 5 percent. Economists had expected orders to be flat in October after a previously reported 3.5 percent jump.

Excluding transportation, orders dropped 2.7 percent, the biggest fall since March 2009, after a revised 1.3 percent increase in September, which was previously reported as a 0.4 percent. Economists had expected orders excluding transportation to rise 0.6 percent in October.

The drop in orders last month was almost across the board, with hefty declines in bookings for machinery, computers, communications equipment and defense aircraft.

Meanwhile, the housing market is still badly stumbling through 2010.  New residential sales dropped 8.1% from September, and are 28.5% below last October, according to a terse statement from HUD:

Sales of new single-family houses in October 2010 were at a seasonally adjusted annual rate of 283,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.  This is 8.1 percent (±16.1%)* below the revised September rate of 308,000 and is 28.5 percent (±12.6%) below the October 2009 estimate of 396,000.

The median sales price of new houses sold in October 2010 was $194,900; the average sales price was $248,200. The seasonally adjusted estimate of new houses for sale at the end of October was 202,000. This represents a supply of 8.6 months at the current sales rate.

At the same time, however, there was also some potential good news on unemployment.  The Department of Labor gave an early accounting for initial jobless claims last week, which would normally be released on Thursday, but the holiday makes that impossible this week.  The new report shows the lowest level of initial jobless claims all year:

In the week ending Nov. 20, the advance figure for seasonally adjusted initial claims was 407,000, a decrease of 34,000 from the previous week’s revised figure of 441,000. The 4-week moving average was 436,000, a decrease of 7,500 from the previous week’s revised average of 443,500.

The advance seasonally adjusted insured unemployment rate was 3.3 percent for the week ending Nov. 13, a decrease of 0.1 percentage point from the prior week’s unrevised rate of 3.4 percent.

The advance number for seasonally adjusted insured unemployment during the week ending Nov. 13 was 4,182,000, a decrease of 142,000 from the preceding week’s revised level of 4,324,000. The 4-week moving average was 4,309,000, a decrease of 51,500 from the preceding week’s revised average of 4,360,500.

However, this comes with a big caveat.  The last time the DoL gave an early estimate of initial jobless claims, it had to guess at data from nine states.  It turned out that those guesses were overly optimistic and had to be adjusted upward significantly in the next report.  It would be good news indeed if initial claims declined this dramatically from the extraordinarily consistent numbers over this entire year, but we’ll have to wait for next week’s report to confirm it actually happened.

In any event, 407,000 is still about 100,000 above where we need to be to indicate actual and significant net job creation in the economy.  With durable goods orders dropping significantly in October and inventories expanding in Q3, that kind of growth still looks far off.