WASHINGTON -- The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting the labor market recovery was gaining traction.
The economy's brightening outlook was dimmed somewhat by another report Thursday showing a tumble in housing starts and building permits last month.
"This part of economy is going in the wrong direction while the rest of the economy is picking up," said Anthony Karydakis, chief economic strategist at Miller Tabak in New York.
Initial claims for state unemployment benefits dropped 3,000 to a seasonally adjusted 302,000 for the week ended July 12, the Labor Department said. Economists had forecast first-time applications for jobless aid rising to 310,000.
The four-weak average of claims, considered a better gauge of labor market trends as it irons out week-to-week volatility, hit its lowest level in seven years.
Prices for U.S. Treasury debt extended gains after the data, while U.S. stock index futures held losses.
The claims data covered the survey week for July nonfarm payrolls. Claims fell 12,000 between the June and July survey period, suggesting another month of solid job gains after June's hefty 288,000 increase.
Employment has grown by more than 200,000 jobs in each of the last five months, a stretch not seen since the late 1990s.
Federal Reserve Chair Janet Yellen cautioned Tuesday the Fed could raise interest rates sooner and more rapidly than currently envisioned if the labor market continued to improve faster than anticipated by policymakers.
Economists currently don't expect the U.S. central bank to start raising interest rates before the second half of 2015. The Fed, which is wrapping up its monthly bond buying program, has kept overnight lending rates near zero since December 2008.
The claims report showed the number of people still receiving benefits after an initial week of aid was the lowest in seven years in the week ended July 5. The unemployment rate for people receiving jobless benefits fell one-tenth of a percentage point to 1.9 percent during the same period.
While the broader economy has rebounded from the first-quarter slump, housing is struggling to get back on track since stalling in late 2013 in the wake of a rise in mortgage rates.
Groundbreaking declined 9.3 percent to a seasonally adjusted annual 893,000 million unit pace, the lowest since September, the Commerce Department said in a separate report. That was the second straight month of declines and confounded economists' expectations for a rise to a 1.02 million unit rate.
Apart from high borrowing costs, housing has been constrained by a shortage of properties for sale, which is keeping house prices elevated and pricing first-time buyers out of the market.
Groundbreaking for single-family homes, the largest part of the market, tumbled 9 percent in June to a 575,000 unit pace, the lowest since November 2012. Single-family starts in the South hit a two-year low.
Starts for the volatile multifamily homes segment dropped 9.9 percent to a 318,000 unit rate.
Permits fell 4.2 percent to a 963,000 unit pace in June. Economists had expected them to rise to a 1.04 million unit pace. With permits now leading starts, groundbreaking could pick up in the months ahead.
Permits for single-family homes increased 2.6 percent to a 631,000 unit pace, the highest level since November. Permits for multifamily housing tumbled 14.9 percent to a 332,000 unit pace.
-Additional reporting by Richard Leong in New York.
9 Numbers That'll Tell You How the Economy's Really Doing
Labor Market Data Upbeat, but Housing Starts Fall Sharply
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.