Trade, housing data showing some stability at very low levels; labor market weakness persists

Trade, housing data more stable, but still weak

WASHINGTON — Despite weak performances in three areas — trade, home sales and job openings — the U.S. economy appears closer to stabilizing, though at low levels, economists said.

The Commerce Department said the trade deficit widened to $27.6 billion in March, from February’s revised $26.1 billion gap, which had been the smallest since November 1999.

Through the first three months of this year, the trade deficit ran at an annual rate of $359.7 billion, far below last year’s $681.1 billion. Economists expect the deficit will remain low this year as the U.S. recession crimps demand for foreign goods.

The global downturn also has cut into sales of U.S. exports. That could limit any improvement in the trade gap, which reflects the higher value of America’s imports compared with its exports.

The export slump has been a blow to U.S. manufacturing giants like 3M Co. and Honeywell International Inc. that derive a large part of their sales from foreign markets.

For March, exports of goods and services fell 2.4 percent to $123.6 billion. That was the lowest level since August 2006. Sales of farm products dropped $2.4 billion, while exports of capital goods slid $1.7 billion, led by big declines in sales of civilian aircraft, telecommunications equipment, semiconductors, and domestic autos and auto parts.

U.S. imports also fell despite imports of oil rising 6.2 percent to $17.2 billion, the highest level since January. But analysts said the minor drops pointed to a leveling-off point, rather than future declines.

“The composition of exports suggest that the global economy is beginning to stabilize,” Nigel Gault, chief U.S. economist at IHS Global Insight, wrote in a research note. “The steepest export declines are behind us. But given the weak state of overseas economies, we do not expect the U.S. recovery to be export-led.”

The March trade deficit also was smaller than the one the government assumed when it released its first estimate showing the overall economy fell at an annual rate of 6.1 percent in the January-March quarter. That means the next estimate for the first quarter likely will be revised to show a drop of around 5.7 percent, Gault said.

3M, maker of Scotch tape, Post-It Notes and automotive parts, saw sales plummet in the first quarter partly due to lower overseas demand. A bellwether of the U.S. economy, the Maplewood, Minn.-based company has operations in more than 60 countries, and generated about two-thirds of its revenue outside the U.S. last year.

Deutsche Bank analyst David Begleiter says there are clear signs of improvement for 3M, especially with demand in China expected to pick up due to Beijing’s stimulus package. Still, China reported Tuesday that its global export sales fell 22.6 percent in April, fresh evidence that pain in the country’s trade sector persists due to slumping global demand.

“Some companies have entrenched themselves into local economies and this increased focus helps them weather the storm better than companies that use a standardized approach for all foreign countries,” said Frost and Sullivan analyst Dilip Sarangan. He cited Morristown, N.J.-based Honeywell for performing well in countries like India and China in recent years.

But Honeywell, which makes aircraft equipment, specialty chemicals and building control systems, has warned that the deepening global recession will make 2009 a tough year.

The politically sensitive trade deficit with China rose 10 percent to $15.6 billion in March. But for the first three months of this year, the deficit with China is running 10 percent below last year’s pace, according to the Commerce Department.

China for more than a decade has had the largest trade surplus with the U.S. The gap has triggered repeated calls in Congress for a crackdown on what critics see as unfair trade practices in China that also have resulted in the loss of millions of American manufacturing jobs.

With the U.S. recession expected to last until the second half of this year and the downturn in many other nations expected to drag into 2010, economists don’t expect a significant rebound in trade anytime soon.

Meanwhile, home prices in the U.S. also continue to fall, though that has prompted sales gains in a handful of states. The National Association of Realtors said median sales prices of existing homes declined in 134 out of 152 metropolitan areas compared with the same period a year ago. Nationwide, sales of foreclosures and other distressed properties made up about half of the market.

The median sales price nationwide was $169,900, down 13.8 percent from a year ago. The median price is the midpoint, which means half the homes sold for more and half for less.

“I think we’re near a bottom, but we’re not there yet,” said David Resler, chief economist at Nomura Securities. While prices could hit bottom as soon as this summer, he said, they are likely to remain stable and start edging higher slowly.

But the nascent signs of recovery in the housing market could be short-lived if employers lay off more workers in bulk.

There were 2.7 million jobs available nationwide in March, down from 3 million in February and 4 million a year ago, the Labor Department said Tuesday. That’s also the fewest in the eight years the department has tracked job openings.

Other recent reports indicate that while layoffs may be slowing compared with the waves announced earlier this year, hiring hasn’t picked up much since the department gathered the job openings data in March.

The department on Friday reported 539,000 net job losses in April. While still elevated, it was the lowest level in six months and below the 700,000 monthly average during the first quarter of this year.

Many economists say the unemployment rate, which hit 8.9 percent in April, will climb to around 10 percent even if the recession ends and a recovery begins sometime this fall.

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AP Business Writers Donna Borak, Christopher S. Rugaber and Alan Zibel contributed to this report.