US President Barack Obama’s administration on Wednesday unveiled the details of a US$75 billion rescue plan to stem rising home foreclosures as grim data suggested a deepening recession.
The Treasury Department said between 7 million and 9 million homeowners could be helped through the program through either home loan modifications or mortgage refinancings.
“It is imperative that we continue to move with speed to help make housing more affordable and help arrest the damaging spiral in our housing markets,” US Treasury Secretary Timothy Geithner said in a statement.
Even with mortgage rates now at historic lows, the US housing market continues to slump as prospective buyers are scared off by falling home prices, a recession firmly in its second year and rising unemployment.
The government’s release of a detailed blueprint for stabilizing the housing sector came amid news of a further deterioration in the job market that signaled a poor reading from the Labor Department expected on Friday.
Data from payrolls firm Automatic Data Processing (ADP) showed the private sector shed 697,000 jobs last month, accelerating the hemorrhaging from January and far exceeding most analysts’ expectations of 630,000 jobs eliminated.
The reading was the worst since ADP began tracking the data in 2000.
Before ADP’s report, most analysts had expected the government to announce the economy shed a seasonally adjusted 650,000 jobs, after 598,000 in January.
The unemployment rate is forecast to jump to 7.9 percent from 7.6 percent in January, the highest level since 1992.
Another report by a private firm highlighted further contraction in the service sector, which, in comparison with manufacturing, had resisted the economic headwinds until recent months.
The Institute for Supply Management (ISM) said that its non-manufacturing index contracted for the fifth consecutive month to 41.6 percent last month from 42.9 percent in January, showing the contraction was accelerating.
An index reading below 50 indicates a decline in activity, while a higher figure indicates growth.
“The pace of contraction of business activity is likely to pick up a little in March as inventory sentiment is still quite negative,” said Brian Bethune, economist at IHS Global Insight.
The US Federal Reserve said in its Beige Book report on Wednesday that US economic activity “deteriorated further” through last month, lowering prospects of a quick recovery.
The report, to be used at the upcoming meeting of Fed policymakers from March 17 to March 18, said the troubles were broad-based, citing weak consumer spending, tight credit and further declines in manufacturing.
“Looking ahead, contacts from various districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010,” the report said.
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