While other data on Thursday showed a marginal rise in first-time
applications for unemployment benefits last week and a slowdown in
factory activity this month, the deterioration was not enough to
change the picture of an improving economy.
"We have an economy that is firing on almost all cylinders and we
expect to see a noticeable pick-up in growth in 2014," said Gus
Faucher, senior economist at PNC Financial Services Group in
Sales of previously owned homes rose 1 percent last month to an
annual rate of 4.87 million units, the National Association of
The sales pace, however, was slower than economists' forecast and
some blamed frigid weather. Sales fell in the Northeast and the
Midwest, which suffered the brunt of cold weather in December.
"The recent housing market slowdown is being exacerbated by
transitory factors such as weather," said Gennadiy Goldberg, an
economist at TD Securities in New York. "We generally expect housing
market activity to accelerate in subsequent months."
Sales in 2013 were the highest since 2006 and prices increased 11.5
percent, the biggest advance since 2005.
Existing home sales lost steam late in the summer as a run-up in
mortgage rates and a shortage of properties sidelined potential
buyers. December's rise added to pending and new home sales data in
offering signs of a tentative pick-up in activity.
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.
"Although claims data can be notoriously volatile at this time of
year, there is nothing in the data to suggest that economic growth
has down shifted early in 2014," said John Ryding, chief economist
at RDQ Economics in New York.
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Separately, financial data firm Markit said its preliminary U.S.
Manufacturing Purchasing Managers Index fell to 53.7 early this
month from 55.0 in December.
A reading above 50 indicates expansion. Activity was held back by a
slowdown in new orders and a contraction in export orders. Some
cooling off is expected in manufacturing after strong growth in the
The jobless claims report showed the number of people still
receiving benefits under regular state programs after an initial
week of aid rose to a six-month high in the week ended January 11.
But it also showed 1.35 million long-term unemployed Americans
dropped off the rolls the week before after their benefits expired.
Economists expect the expiration of these extended benefits to push
the unemployment rate, currently at 6.7 percent, down by as much
half a percentage point as some former recipients drop out of the
labor force or take up low paying jobs that they previously would
not 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.
"The Fed could find its forward guidance message more complicated in
the months ahead as the unemployment rate continues to decline more
sharply than anticipated," said TD Securities' Goldberg.
Fed policymakers meet next Tuesday and Wednesday to discuss monetary
policy and the outlook for the economy.
(Reporting by Lucia Mutikani; additional
reporting by Margaret Chadbourn in Washington and Steven C Johnson
in New York; editing by Paul Simao and Stephen Powell)
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