Newspaper article THE JOURNAL RECORD

Housing Starts Plunge 9.8 Percent for January

Newspaper article THE JOURNAL RECORD

Housing Starts Plunge 9.8 Percent for January

Article excerpt

WASHINGTON (AP) _ There are new signals that Federal Reserve-engineered interest rate increases are having their intended effect of slowing the nation's economy.

The Commerce Department reported Thursday that housing starts plunged 9.8 percent in January, to a seasonally adjusted annual rate of 1.38 million, the biggest drop in a year. The weakness was seen in every region.

At the same time, the Labor Department said the number of newly laid-off American workers filing claims for unemployment benefits jumped by 20,000 to the highest level in a month.

Robert R. Davis, an economist with the Savings Community Bankers of America, said the decline in housing construction "is not unique to that sector of the economy."

"I expect the rest of the economy to be moving down as well," he added. "The GDP will be well below 2 percent (at an annual rate) in the second half of the year."

The gross domestic product grew 4 percent in 1994, despite six interest rate increases. The Fed raised rates again last month, continuing its effort to slow the economy sufficiently to prevent any escalation in inflation.

And noting the jump in jobless claims to 338,000 last week, economists at Donaldson, Lufkin Jenrette Securities Corp. said it points "to a potential downward trend in the labor market." It was the highest level since 339,000 during the week ended Jan. 14.

To economist David Lereah of the Mortgage Bankers Association, the Commerce report was "confirmation that the housing sector is weakening."

The January drop in starts was the second monthly decline. They fell 0.6 percent in December, to a 1.53 million annual rate, after rising 5.9 percent during favorable building weather in November.

The January decline was the largest since a 21 percent plunge in January 1994, when winter storms prevented builders from laying foundations. …

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