Weekly Jobless Claims Hit 8-Week Low; Housing Starts Fall

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Lynne Sladky/APA builder works on the site of the Landmark community, a group of condos and townhouses built by Lennar Homes, in Doral, Fla.
By Lucia Mutikani

WASHINGTON -- The number of Americans filing new applications for unemployment benefits fell last week to the lowest level in eight weeks, suggesting the labor market continued to strengthen despite the recent tightening in financial market conditions.

While other data on Thursday showed housing starts fell for a second straight month in August, they remained above the one million-unit mark, which signals a housing market growing at a solid clip. In addition, building permits rose last month.

%VIRTUAL-pullquote-Speculation will now shift to December as the next most likely month for U.S. rates to start rising.%The signs of a firming economy are supportive of an interest rate hike by the Federal Reserve later this year, after the U.S. central bank Thursday kept borrowing costs near zero, citing concerns about the global economy.

"Speculation will now shift to December as the next most likely month for U.S. rates to start rising," said Chris Williamson, chief economist at Markit in London.

"The 'data dependent' Fed will want to see further robust non-farm payroll growth between now and then as well as indications that the pace of economic growth is not wilting under the pressure of China's slowdown."

Initial claims for state unemployment benefits dropped 11,000 to a seasonally adjusted 264,000 for the week ended Sept. 12, the Labor Department said. That was the best reading since the week ended July 18, when claims hit their lowest level since 1973.

It marked the 28th straight week that claims remained below the 300,000 threshold, which is usually associated with a strengthening labor market. Economists had forecast claims holding at 275,000 last week.

The dollar fell against a basket of currencies on the Fed's rate decision, while prices for U.S. Treasury debt rallied. Stocks on Wall Street rose in volatile trade.

Firming Labor Market

The claims data covered the period during which the government surveyed employers for the nonfarm payrolls portion of the September employment report. Claims fell 13,000 between the August and September survey weeks, suggesting some pickup in job growth after slowing in August.

Labor market conditions are tightening, with record high job openings. At a 7½-year low of 5.1 percent, the unemployment rate is within the range most Fed officials think is consistent with a low but steady rate of inflation.

In a second report, the Commerce Department said groundbreaking for new homes dropped 3 percent to a seasonally adjusted annual pace of 1.13 million units last month.

Despite the fall, which reflected declines in groundbreaking on single and multifamily projects, starts remained above a one million-unit pace for the fifth straight month. Building permits increased 3.5 percent last month to a 1.17 million-unit pace, after declining 15.5 percent in July.

"The small dip in August housing starts is minor considering the sustained momentum we've seen in housing overall in 2015," said Bill Banfield, vice president at Quicken loans in Detroit.

"When you couple the slow but steady rise in single-family unit construction with an increase in builder confidence, it's further support that housing is returning to its place as a major player in driving economic growth."

The firming labor market has unleashed pent-up demand for housing, especially among young adults. A report Wednesday showed confidence among homebuilders advancing to a near decade high in September.

In August, groundbreaking for single-family homes, which accounts for the largest share of the market, fell 3 percent to a 739,000 unit pace. Single-family home building in the South, where most of the home construction takes place, rose 9.2 percent to the highest level since December 2007.

Starts for the volatile multifamily segment fell 3 percent to a 387,000 unit rate. Single-family building permits rose 2.8 percent in August to their highest level since January 2008. Multifamily building permits rose 4.7 percent.

A third report showed manufacturing continued to struggle against the headwinds of a strong dollar and soft global demand.

The Philadelphia Fed said its business activity index fell to minus 6 in September from positive 8.3 in August. A reading below zero indicates contraction in the region's manufacturing.

-Dan Burns contributed reporting from New York.

10 PHOTOS
9 Numbers That'll Tell You How the Economy's Really Doing
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Weekly Jobless Claims Hit 8-Week Low; Housing Starts Fall
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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