US weekly jobless claims fall slightly; Housing starts at their lowest in 13 months

A ‘Now Hiring’ sign is displayed on the window of an IN-N-OUT fast food restaurant in Encinitas, California, U.S., May 9, 2022. REUTERS/Mike Blake/File Photo

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  • Weekly jobless claims fall by 3,000 to 229,000
  • Continuing claims rise by 3,000 to 1.312 million
  • Housing starts plunge 14.4% in May; permits down 7.0%

WASHINGTON, June 16 (Reuters) – The number of Americans filing new claims for unemployment benefits fell less than expected last week, suggesting some cooling in the labor market, although conditions remain tight.

The outlook for the economy darkens, with further data on Thursday showing residential construction slumped to a 13-month low in May, weighed down by soaring mortgage rates and building material prices. Manufacturing also seems to be losing steam. The slowing economy comes as the Federal Reserve aggressively raises interest rates to fight inflation.

The latest batch of economic data followed news this week of a surprise drop in retail sales last month and could amplify fears of a recession. The Fed on Wednesday raised its key rate by three-quarters of a percentage point, the biggest hike since 1994.

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“The risk of a hard landing for the US economy has increased exponentially,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “The aggressive and abrupt policy tightening by the Fed could soon be criticized for letting in the winds of recession.”

Initial claims for state unemployment benefits fell by 3,000 to a seasonally adjusted 229,000 for the week ended June 11. Economists polled by Reuters had forecast 215,000 claims for the past week.

The drop partially reversed the previous week’s jump, which had lifted deposits near a five-month high, and was blamed on seasonal fluctuations around moving holidays like Memorial Day.

Significant increases in claims were reported in California, Ohio, Illinois and Michigan. Claims have dropped in Missouri.

There has been a steady increase in reports of job cuts, primarily in the tech and housing sectors. Still, claims have remained stuck in a narrow range since plunging to a more than 53-year low of 166,000 in March.

Fed Chairman Jerome Powell told reporters on Wednesday that “the labor market has remained extremely tight” and that “labour demand is very strong.” The US central bank has raised the key rate by 150 basis points since March. Read more

“For now, supply-demand mismatches will keep deposits low,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “But the level could start to rise as the Fed continues to remove accommodative policy to slow demand.”

US stocks opened sharply lower. The dollar fell against a basket of currencies. US Treasury yields rose.

NARROW LABOR MARKET

The claims report showed the number of people receiving benefits after a first week of help rose by 3,000 to 1.312 million in the week ending June 4. There were 11.4 million job openings at the end of April.

Higher borrowing costs combine with record house prices to cool the housing market. This could help realign housing demand and supply and lower prices.

A separate report from the Commerce Department on Thursday showed housing starts fell 14.4% to a seasonally-adjusted annual rate of 1.549 million units last month, the lowest level since April 2021. Economists had forecast housing starts would slip at a rate of 1.701 million units.

Permits for future housing fell 7.0% to 1.695 million units. A survey on Wednesday showed the National Association of Home Builders/Wells Fargo Housing Market Sentiment Index hit a two-year low in June, with a traffic gauge of potential buyers falling below break-even. of 50 for the first time since June 2020. Learn more

Single-family housing starts, which account for the largest share of home construction, fell 9.2% to a rate of 1.051 million units last month, the lowest since August 2020.

Construction of single-family homes increased in the Northeast, but fell in the Midwest, South and West regions.

The 30-year fixed-rate mortgage jumped 25 basis points last week to an average of 5.65%, the highest level since November 2008, according to data from the Mortgage Bankers Association.

Building permits for single-family homes fell 5.5% to a rate of 1.048 million units, the lowest since July 2020.

Housing starts for housing projects of five or more units fell 26.8% to 469,000 units. Permits for multi-family dwellings fell 10.0% to 592,000 units.

The number of homes approved for construction that have not yet started rose 0.7% to 283,000 units. The order book for single-family dwellings remained unchanged at 152,000. These will eventually become housing starts and help support residential construction.

“Mortgage rates above 6% are probably enough to cool the housing market, which isn’t necessarily a bad thing,” said Ryan Sweet, economist at Moody’s Analytics in West Chester, Pennsylvania.

“The housing market was hot, and it wasn’t sustainable.”

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Reporting by Lucia Mutikani Editing by Nick Zieminski

Our standards: The Thomson Reuters Trust Principles.

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