Home Sales End Losing Streak; Jobless Claims Rise

Existing Home Sales
Gene J. Puskar/AP

By Lucia Mutikani

WASHINGTON -- U.S. home resales rose in December after three straight months of declines, showing some resilience in the housing market recovery despite higher mortgage rates.

While other data Thursday showed a marginal rise in first-time applications for unemployment benefits last week and a slowdown in factory activity this month, the underlying trend continued to point to better economic fundamentals.

Existing home sales rose 1 percent last month to an annual rate of 4.87 million units, the National Association of Realtors said. Economists polled by Reuters had expected home resales to rise to a 4.94 million-unit pace in December.

November's sales pace was revised to 4.82 million units from the previously reported 4.90 million-unit rate. Economists said cold weather last month likely hampered sales.

"The recent housing market slowdown is being exacerbated by transitory factors such as weather," said Gennadiy Goldberg, %VIRTUAL-article-sponsoredlinks%an economist at TD Securities (TD) in New York. "We generally expect housing market activity to accelerate in subsequent months."

Home sales in 2013 were the highest since 2006. In a separate report, the Labor Department said initial claims for state unemployment benefits ticked up 1,000 to a seasonally adjusted 326,000 last week.

The four-week average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, fell 3,750 to 331,500.

That suggested the labor market continued to steadily improve.

Acceleration in Job Growth Eyed

Last week's claims report covered the survey period for January nonfarm payrolls data. The four-week average for new claims fell 12,250 between the December and January survey periods, suggesting some acceleration in job growth this month.

Employers added only 74,000 new jobs to their payrolls in December after creating 241,000 positions the prior month. That was at odds with other employment indicators that suggested a brisk pace of hiring in December.

Economists have dismissed the sharp step-back in job growth as a fluke, noting that a cold snap during the month weighed on construction, transportation and utilities payrolls.

But with the weather also unseasonably cold in January, employment in these sectors likely remained subdued this month.

Separately, financial data firm Markit said its preliminary U.S. Manufacturing Purchasing Managers Index dipped to 53.7 from December's reading of 55. A reading above 50 indicates expansion.

Activity was held back by a slowdown in new orders and a contraction in export orders.

"The headline reading is still solidly in positive territory and is in line with our view that manufacturing activity growth will pick up in 2014," said Cooper Howes, an economist at Barclays in New York.

The jobless claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid rose 34,000 to 3.06 million in the week ended Jan. 11.

A total of 3.71 million people were receiving benefits under all programs in the week ended Jan 4. Benefits for 1.35 million long-term unemployed Americans expired on Dec. 28.

Economists expect the expiration of these benefits to push the unemployment rate, currently at 6.7 percent, lower as some of the former recipients drop out of the labor force or are forced to take up low paying jobs that they previously wouldn't have considered.

Should the unemployment rate drop because former recipients of jobless benefits have dropped out of the labor force, that could pose problems for the Federal Reserve, which has put the unemployment rate at the center of monetary policy.

The Fed has said it will hold interest rates near zero at least until the jobless rate drops to 6.5 percent. But if a big part of the decline reflects people dropping out of the labor force, that could be seen as a sign of weakness, not strength.