The Afternoon Report: The Newest Numbers
Economy watchers, trying to triangulate the economy's position amid credit risks and the housing slump, found fresh numbers and economic utterances to crunch and parse today.</br></br>The Organization for Economic Cooperation and Development -- which publishes comparable social and economic stats for some 30 countries -- reported Wednesday that the U.S. economic slowdown will be significant, as the real estate crisis continues. Housing "is set to exert a longer and more potent than expected drag" on the U.S. economy, said Jean-Philippe Cotis, chief economist for the Paris-based economic think tank. Consumers will also be tested by "mortgage rate resets, tighter credit standards, weaker collaterals and slower job creation." In a press briefing, Mr. Costis also said he expects the Federal Reserve to ease rates sooner rather than later. Another ominous, yet inconclusive, indicator of the direction of the U.S. economy out early Wednesday, the ADP National Employment Report, said that jobs in the private sector rose by 38,000 in August, much less than expectations. This data tidbit shined one of the first statistical spotlights on the economy in August, when the worries over exposure to subprime securities spooked investors out of credit markets. Still, Goldman Sachs economists warned that the ADP report "gives a picture of the labor market for the week of Aug. 12, only part way through the market turmoil and before employment could really react to the ongoing credit crunch. More weakness could well be yet to come."</br></br>Also out Wednesday were housing numbers from the National Association of Realtors. The group's index of pending sales of existing homes decreased at a seasonally adjusted annual rate of 12.2% in July from June, the industry group said Wednesday. The NAR index, based on signed contracts for previously owned homes, was 16.1% below the level of July 2006. An NAR statement accompanying the data release also suggested existing-home sales will likely sag more as mortgage disruptions tied to credit concerns work their way into the housing market. BNP Paribas economists noted that "most worryingly is that this report is clearly 'pre-turmoil', reflecting resale transactions agreed in July, so before August's financial market turmoil, lurch higher in jumbo mortgage rates and the freezing over of much of the mortgage market. How bad next month's pending sales index (and this month's new home sales report) might be is really quite frightening." Still more economic reports are on tap for later today, when the Federal Reserve will release its "beige book" report. Concerns over the credit crunch and statements from Fed Chairman Ben Bernanke last week will put extra weight on the regularly published collection of on-the-ground business anecdotes from the Fed's 12 regional banks.</br></br>Housing figures proved particularly difficult for investors to digest, and major indexes reversed course after Tuesday's rally. The Dow Jones Industrial Average fell 172.74, or 1.28%, just after midday to 13276.12. The Standard & Poor's 500-stock index lost 18.62, or 1.25%, to 1470.80 and the technology-heavy Nasdaq Composite index was down 20.41, or 0.78%, to 2609.83. Treasury prices gained, with the 10- year note rising to yield 4.484% after midday. The 30-year bond was up to yield 4.875%. Crude prices were up five cents to $75.13. The dollar weakened against the yen and the euro. Shares in Europe sank and Asian markets closed mixed.</br></br>---