Last updated: October 19, 2012 4:36 pm

US unemployment drops in key states

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The unemployment rate dropped in seven out of nine battleground states that will decide the presidential election, bolstering President Barack Obama’s position on the economy as he heads into the final two and a half weeks of campaigning.

According to state-level labour department data for September, the unemployment rate dropped in Ohio, a pivotal Midwestern swing state, from 7.2 per cent to 7 per cent, keeping it well below the national average of 7.8 per cent.

Four other swing states – Iowa, New Hampshire, Virginia and Wisconsin – also have healthier jobless rates than America as a whole, with Iowa home to the lowest rate of the election battlegrounds at 5.2 per cent.

However, Colorado, Florida, North Carolina, and Nevada – which has the highest jobless rate at 11.8 per cent – are faring worse than the rest of the country.

The drop in the unemployment rate in Ohio is particularly encouraging for Mr Obama – who is fighting hard to maintain an advantage there in the face of Mitt Romney’s resurgence since the first presidential debate at the beginning of October.

The latest polling average by Realclearpolitics.com shows Mr Obama leading Mr Romney in Ohio by 2.4 percentage points. But the drop in the unemployment rate in Ohio is tempered by a significant drop in non-farm payroll formation in the state, which lost 12,800 jobs last month, heavily concentrated in the manufacturing sector.

This could offer some fodder for the Republican candidate Mitt Romney’s campaign in its bid to persuade undecided voters in the area that Mr Obama’s economic prescriptions are failing in the area.

Payrolls data and unemployment data can sometimes offer conflicting signals on a state level, as they do on a national level. For instance, the US created a relatively poor 114,000 jobs in September nationally, according to the establishment survey, but the unemployment rate nonetheless dropped from 8.1 per cent to 7.8 per cent.

Virginia also offered mixed messages last month. Its unemployment rate remained stuck at 5.9 per cent, but job creation was relatively strong, with a jump of 11,500 in non-farm payroll formation. Nevada offered consistent signs of recovery in its labour market ravaged by the housing crisis, with unemployment dropping from 12.1 per cent to 11.8 per cent, as the state’s economy generated 7,100 new jobs. Florida’s job market conditions were essentially flat, with a slight drop in joblessness from 8.8 per cent to 8.7 per cent, as 800 new jobs were created.

Separately, sales of previously owned homes dipped 1.7 per cent in September to an annual rate of 4.75m units from 4.82m the month before, National Association of Realtors’ data showed on Friday.

The fall was expected given that August’s data showed the largest monthly percentage gain since the previous August and the highest rate since May 2010.

Sales of existing homes are 11 per cent higher than the 4.28m-unit level of September 2011.

Jim O’Sullivan, chief US economist at High Frequency Economics, said: “The drop in September follows the much larger gain in August, consistent with the trend still being upward.”

Recent housing data have pointed to strength in a part of the economy that has struggled for the past six years, another likely boost to Mr Obama’s re-election campaign.

Record low mortgage rates have spurred buyers to move ahead with home purchases, although tight credit conditions and tougher mortgage requirements are still holding many back.

Lawrence Yun, NAR chief economist said: “More people are attempting to buy homes than are able to qualify for mortgages and recent price increases are not deterring buyer interest. Rather, inventory shortages are limiting sales, notably in parts of the west.”

Total housing inventory at the end of September fell 3.3 per cent to 2.32m existing homes available for sale, which represents a 5.9-month supply at the current sales pace. The level fell below the 6-month market for the first time since March 2006.

“The shrinkage in housing supply is supporting ongoing price growth, a pattern that could accelerate unless home builders robustly ramp up production,” Mr Yun said.

The national median existing-home price for all housing types was $183,900 in September, up 11.3 per cent from September last year. The last time there were seven consecutive monthly year-over-year increases was from November 2005 to May 2006.

Jonathan Basile, director of economics at Credit Suisse, said: “More reports of sustained home price gains have helped – and should continue to help – households’ views of selling conditions, which has been a better guide for home sales during this cycle than buying conditions/housing affordability.”

Some of the strength in home prices is a reflection of a shift from sales of distressed homes sold at steep discounts towards more traditional sales, analysts said. Distressed homes accounted for 24 per cent of sales in September, down from 30 per cent 12 months earlier.

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