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WRAPUP 3-U.S. homes sales snap losing streak, jobless claims rise
January 23, 2014 / 2:00 PM / in 4 years

WRAPUP 3-U.S. homes sales snap losing streak, jobless claims rise

* Existing home sales rebound 1 percent in December
    * Jobless claims up last week, four-week average falls
    * Claims data covers January nonfarm payrolls survey week

    By Lucia Mutikani
    WASHINGTON, Jan 23 (Reuters) - 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 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 Pittsburgh. 
    Sales of previously owned homes rose 1 percent last month to
an annual rate of 4.87 million units, the National Association
of Realtors said.
    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. 
    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. 
    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 fourth quarter.
    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 Jan. 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.

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