|
 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.
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 kept borrowing costs near zero on Thursday, 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 nonfarm
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 was the 28th straight week
that claims remained below the 300,000 threshold, which is usually
associated with a strengthening labor market.
The dollar fell to a three-week low against the euro on the Fed's
rate decision, while prices for U.S. Treasury debt rallied. Stocks
on Wall Street ended lower in volatile trade.
Concerns about growth in China and other emerging market economies
ignited volatility in financial markets. The ensuing drop in equity
prices, further dollar gains and a widening of risk spreads caused
some tightening in financial conditions.
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 a
slowdown in August.
Labor market conditions are tightening, with record high job
openings. At a 7-1/2-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 press conference after the rate decision, Fed Chair Janet
Yellen acknowledged the labor market improvement, but said some
cyclical weakness likely remains.
In a second report, the Commerce Department said groundbreaking for
new homes dropped 3.0 percent to a seasonally adjusted annual pace
of 1.13 million units last month.
[to top of second column] |
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 on Wednesday showed
confidence among homebuilders advancing to a near decade high in
September.
Yellen said the housing market should be doing even better.
"Housing starts are below levels that seem consistent with
underlying demographics especially in an economy that's creating
jobs and we have lots of people who are still doubled up and demand
for housing should be there and should materialize as the job market
improves and income growth improves," she said.
In August, groundbreaking for single-family homes, which accounts
for the largest share of the market, fell 3.0 percent. 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 also fell 3.0 percent.
Single-family building permits rose 2.8 percent in August to their
highest level since January 2008. Multi-family 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
6.0 in September from positive 8.3 in August. A reading below zero
indicates contraction in the region's manufacturing.
(Reporting By Lucia Mutikani; Additional reporting by Dan Burns in
New York; Editing by Andrea Ricci and Meredith Mazzilli)
[© 2015 Thomson Reuters. All rights
reserved.] Copyright 2015 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
