US economy shows strength as jobless claims fall, home constructions soar

WASHINGTON: US homebuilding rebounded sharply in December as a firming economy boosts demand for rental housing, while an unexpected drop in the number of Americans filing for unemployment benefits last week pointed to a further tightening in the labour market.
The economy’s brightening prospects were underscored by other data on Thursday showing factory activity in the mid-Atlantic region accelerating to a two-year high this month, amid jumps in new orders, employment and inventories.
In addition, manufacturers reported paying more for raw materials and asking for higher prices for their goods, mirroring other recent factory surveys. This suggests that a broad increase in inflation could be on the way.
“The economy is doing great, whichever way you look at it,” said Harm Bandholz, chief US economist at UniCredit Research in New York. “The labour market is close to full employment and the housing market continues to heal. Trump is inheriting a strong economy.”
Housing starts jumped 11.3 per cent to a seasonally adjusted annual rate of 1.23 million units last month, the Commerce Department said. Starts were driven by a 57.3 per cent surge in the construction of multi-family housing units, which offset a 4 per cent drop in single-family starts.
Economists polled by Reuters had forecast housing starts increasing to a 1.20 million-unit rate in December. Housing starts increased 4.9 per cent in 2016.
Permits for future home construction slipped 0.2 per cent to a 1.21 million-rate last month as approvals for the multi-family segment fell 9 per cent. However, permits for single-family homes construction rose 4.7 per cent.
The housing market remains on solid ground even as mortgage rates have jumped above 4 per cent.
The tightening labour market, marked by an unemployment rate near a nine-year low of 4.7 per cent, is fuelling demand for housing. Much of the demand, however, has been concentrated in the multi-family housing segment, in part as a shortage of houses on the market drives home prices higher.
That has priced out some first-time homebuyers from the market, boosting rents. A broad measure of rents increased 3.9 per cent in the year through December, the biggest rise since April 2007. With the labour market near full employment, demand for housing is likely to remain supported this year.
In a separate report, the Labour Department said initial claims for state unemployment benefits fell 15,000 to a seasonally adjusted 234,000 for the week ended January 14. That was just shy of the 233,000 level touched in mid-November, which was the lowest since November 1973.
Economists had forecast first-time applications for jobless benefits rising to 254,000 last week.
It was the 98th straight week that claims remained below 300,000, a threshold associated with a healthy labour market. That is the longest stretch since 1970, when the labour market was much smaller.
The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 10,250 to 246,750 last week, the lowest level since November 1973.
The claims data covered the survey period for January’s nonfarm payrolls.
— Reuters