WRAPUP 2-U.S. home starts falsely pointed up, still weak

(Recasts, rewrites throughout, adds Philadelphia Fed report)

* U.S. June housing starts rise surprising 9.1 percent

* New York City building code drives unexpected gain

* Jobless claims rose by 18,000 last week

By Patrick Rucker

WASHINGTON, July 17 (Reuters) - U.S. housing starts took a surprising jump in June, the government reported on Thursday, but only because of a change in New York's building code that briefly obscured a drop in single-family home building.

Total starts rose 9.1 percent in June but would have dropped 4 percent except for the actions of New York City builders who sped up multi-family projects before new construction rules took hold on July 1, the Commerce Department said.

The rate of building permits, which signal future building plans, rose 11.6 percent but would have climbed only 0.7 percent except for the code change, the government said.

"The housing starts number is bloated," said Pierre Ellis, senior economist at Decision Economics, New York. "The important thing is that single-family starts were weaker than expected."

Single-family home starts were down 5.3 percent in June from the month before.

The dollar was narrowly mixed after firming briefly after the distorted housing data. Treasury prices fell at first but pared losses later after a regional factory gauge showed activity shrinking in July, while stocks were flat.

JOBLESS CLAIMS RISE, MID-ATLANTIC FACTORIES WEAK

In a separate report, the number of workers filing new claims for jobless benefits rose by a less-than-expected 18,000 last week. The four-week average of new jobless claims, considered a better gauge of underlying labor trends, fell for the second consecutive week to 376,500 from 381,000.

"Jobless claims rose, but not dramatically, after a big decline a week earlier. They still suggest a weak economy, but not dramatic job cuts," said Gary Thayer, senior economist at Wachovia Securities, St. Louis, Missouri.

Factory activity in the U.S. mid-Atlantic region shrank again in July, reflecting a weakening economy and the strain of rising costs.

The Philadelphia Federal Reserve Bank said on Thursday its business activity index was minus 16.3 in July, the eighth straight month the index was negative. Economists polled by Reuters had forecast a reading of minus 15.0. Any reading below zero indicates contraction.