May 23, 2013 / 1:00 PM / 6 years ago

WRAPUP 4-U.S. jobs, housing data show economy has some muscle

* Weekly jobless claims fall 23,000
    * Four-week average of claims slip 500
    * May factory activity growth at seven-month low
    * New home sales rise in April, median price at record high

    By Lucia Mutikani
    WASHINGTON, May 23 (Reuters) - The number of Americans
filing new claims for unemployment benefits fell last week,
pointing to resilience in the labor market despite
belt-tightening by Washington.
    The improving employment picture is helping to prop up
housing, with rising home prices keeping domestic consumption
supported, limiting the drag from tighter fiscal policy that is
dampening factory activity.
    "All the eggs are in housing and the consumers' baskets this
quarter. Outside that, there is going to be little support to
growth," said Ryan Sweet, a senior economist at Moody's
Analytics in West Chester, Pennsylvania.
   Initial claims for state unemployment benefits dropped 
23,000 to a seasonally adjusted 340,000 last week, the Labor
Department said on Thursday. Economists had expected claims to
fall to 345,000.
    The drop unwound most of the prior week's jump and suggested
employers were not laying off workers in response to fiscal
austerity, especially the $85 billion in across-the-board
government spending cuts.
    The labor market is being closely watched by the Federal
Reserve as debate heats up over the future of its expansive
monetary stimulus. 
    Fed Chairman Ben Bernanke told lawmakers that a decision to
scale back the $85 billion in bonds the U.S. central bank is
buying each month could come at one of its "next few meetings"
if the economy appeared set to maintain momentum.
    Economists believe that decision could come as early as the
September meeting. Many say any pulling back will be gradual as 
both employment and inflation will likely remain below the
central bank's mandate.
    A separate report from the Commerce Department showed new
single family home sales rose 2.3 percent last month to a
454,000-unit pace. The median sales price for a new home jumped 
14.9 percent from a year ago to a record $271,600.
    "We have seen some momentum in the housing market. The
improving sales are a very broad and powerful positive effect
for the U.S. economy," said Robert Dye, chief economist at
Comerica in Dallas.

    Data on Wednesday showed home resales increased in April to
their highest level in nearly 3-1/2 years, with the median price
for a previously owned house the highest since August 2008.
    Relative strength in the housing market is helping to
mitigate some of the drag from higher taxes and deep government
spending cuts, which has been evident in manufacturing data.
    In a separate report, financial data firm Markit said its
preliminary  Manufacturing Purchasing Managers Index fell to a
seven-month low of 51.9 in May from 52.1 in April. A reading
above 50 indicates expansion.
    "Slower growth could be linked to a combination of fiscal
drag hurting demand at home while at the same time many export
markets remain in fragile states," said Chris Williamson, chief
economist at Markit.
    Economic growth is expected to slow to between a 1.5 and 2.0
percent annual rate in the second quarter after expanding at a
2.5 percent pace in the first three months of the year.
    U.S. financial markets were little moved by the reports as
investors continued to digest Bernanke's comments on Wednesday
and weak factory data from China.
    Stocks on Wall Street fell, with the Standard & Poor's 500
index on pace for its first back-to-back daily drop in a
month. U.S. Treasury debt prices rose, while the dollar fell
against a basket of currencies. 
    Last week's claims data covered the survey period for the
government's report on nonfarm payrolls for May.
    Claims dropped 15,000 between the April and May survey
periods, suggesting steady gains in employment this month.
Employers added 165,000 jobs to their payrolls in April.
    The four-week moving average for new claims, which irons out
week-to-week volatility, slipped 500 to 339,500.
    The claims report showed the number of people still
receiving benefits under regular state programs after an initial
week of aid fell by the most in more than a year to below 3
million. That was the first time in five years so-called
continuing claims were below the 3 million mark.
    "The evidence from jobless claims suggests that layoffs have
slowed, which hints at faster net job creation," said John
Ryding, chief economist at RDQ Economics in New York.
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