Economic contraction larger than previously estimated.  The Bureau of Economic Analysis issued a revised estimate last week for fourth quarter 2008 GDP, showing that real GDP fell at annual rate of 6.2 percent, a much steeper drop than the initial estimate of a 3.8 percent decrease, and much closer to the 5.4 percent decline projected by forecasters last month.   This change in reported GDP was due to a larger than expected downturn in net exports and consumer spending, as well as much smaller than originally reported increase in private inventories (see Chart).  The last time that the U.S. experienced such a steep decline in GDP was the first quarter of 1982.

Durable goods orders and consumer confidence down. The Conference Board’s Consumer Confidence Index declined to another all time low of 25.0 (1985 = 100) in February, down from 37.4 in January.  The Census Bureau released its report on durable goods orders last week, showing a decline in January.  This was the sixth consecutive monthly decrease in durable goods orders and shipments.  Durable goods orders declined 5.2 percent from December. These declines in consumer confidence and durable goods orders do not bode well for the February employment report which will be released this Friday, in spite of an uptick in the January retail sales data released February 12 and an uptick in consumer spending in January reported this week.

Weekly initial jobless claims spike upward.  Initial jobless claims spiked upwards by more than 30,000 to 667,000 last week.  The four-week moving average of initial jobless claims is now 639,000, the highest since the 1981-83 recession.  Continuing claims also increased last week, with 5.1 million workers continuing to claim unemployment benefits.  The four-week moving average of continuing claims is now over 4.9 million.

Home sales and prices continue to plummet.  New residential home sales and the median price of a new home declined in January, according to data reported last week by the U.S. Census and Housing and Urban Development Agency.  Sales of new one-family homes in January 2009 were at seasonally adjusted annual rate of 309,000, 10.2 percent below the December 2008 rate and 48.2 percent below the January 2008 rate.  The months’ supply of new homes is now 13.3, far exceeding the previous record overhang of inventory of 11.6 months experienced in April 1980.  Existing home sales in January, reported last week by the National Association of Realtors, showed a similar decline of 5.3 percent versus December 2008 and 8.6 percent decline versus January 2008.  The S&P/Case Shiller Home Price Index for December 2008 declined by 18.55 percent from December 2007.

JEC HEARING ON FEB. EMPLOYMENT REPORT FRI, MARCH 6, 2009, 9:30 A.M.