US offers foreclosure relief as grim data mounts
Posted: 05 March 2009 0704 hrs

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WASHINGTON: President Barack Obama's administration on Wednesday unveiled the details of a 75-billion-dollar rescue plan to stem rising home foreclosures as grim data suggested a deepening recession.

The Treasury Department said between seven and nine 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," 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 stabilising the housing sector came amid news of a further deterioration in the jobs market that signalled a poor reading from the Labour Department due Friday.

Payrolls firm ADP data showed that the private sector shed 697,000 jobs in February, accelerating the haemorrhaging from January and far exceeding most analysts' expectations of 630,000 jobs eliminated.

The February reading was the worst since Automatic Data Processing (ADP) began tracking the data in 2000.

Nearly half the job losses in February - 359,000 - were in the services sector, which accounts for about 85 percent of non-farm jobs in the world's biggest economy.

That number outpaced the 327,000 service sector jobs lost in January.

The goods-producing sector continued to bleed jobs for the 26th consecutive month, losing 338,000 in February after 287,000 the prior month.

Of those, the battered manufacturing sector shed 219,000 jobs, its 36th consecutive month of job losses, according to ADP.

Analysts cautioned about giving the unemployment snapshot too much weight in predicting the outcome of the Labour Department reports on public and private employment.

"The survey has had a mixed record in forecasting the all important non-farm payrolls data that is due on Friday," said Amit Kara at UBS Investment Research.

Before the ADP report, most analysts had expected the government to announce the economy shed a seasonally adjusted 650,000 jobs in February, 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 its non-manufacturing index contracted for the fifth consecutive month, to 41.6 percent in February, from the 42.9 percent reading in January, showing the contraction was accelerating.

An index reading below 50 indicates a decline in activity, while that above 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 Federal Reserve said in its Beige Book report on Wednesday that US economic activity "deteriorated further" through February, lowering prospects of a quick recovery.

The report, to be used at the upcoming meeting of Fed policymakers March 17-18, said the troubles were broad-based, citing weak consumer spending, tight credit and further declines in the factory sector.

"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. - AFP/de