WASHINGTON: The number of Americans filing applications for unemployment benefits increased less than expected last week, pointing to strong labour market conditions that should continue to support an economy growing at a moderate pace.
The steady economic growth pace was also underscored by other data on Thursday showing home resales rising in August to a 17-month high. While factory activity in the mid-Atlantic region slowed in September, orders remained solid, leading manufacturers in the region to increase employment and boost hours for workers.
The reports suggested that housing and manufacturing, the two weak spots in the economy, were stabilising. The Federal Reserve cut interest rates by another 25 basis points on Wednesday, citing risks to the longest economic expansion in history from a year-long US-China trade war and slowing economic growth overseas.
Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 208,000 for the week ended Sept. 14, the government said. Economists polled by Reuters had forecast claims increasing to 213,000 in the latest week.
Layoffs remain low despite the trade tensions, which have weighed on business investment and manufacturing. But there are concerns that slowing job growth could take some shine off robust consumer spending, which is largely driving the economy.
Last week’s claims data covered the survey period for the nonfarm payrolls component of September’s employment report. Claims were little changed between the August and September survey periods suggesting a steady pace of job growth this month.
The economy created 130,000 jobs in August. Economists say it is unclear whether the loss of momentum in hiring is due to ebbing demand for labour or a shortage of qualified workers.
Job gains have averaged 158,000 per month this year, still above the roughly 100,000 per month needed to keep up with growth in the working age population and sustain a healthy pace of consumer spending.
“If there was a problem in the labour market it would be visible in initial claims and they are not raising any red flags,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Though business confidence has dropped noticeably this year, it hasn’t led businesses to lay off workers yet.”
The dollar fell against a basket of currencies, while prices for US Treasuries rose. Stocks on Wall Street were trading higher, with Microsoft’s planned share buy-back helping to push the benchmark S&P 500 within striking distance of its record high.
In a second report on Thursday, the National Association of Realtors said existing home sales increased 1.3 percent to a seasonally adjusted annual rate of 5.49 million units last month.
That was the second straight monthly gain in sales and confounded economists expectations for a 0.4 percent drop to 5.37 million units.
The increase in home resales, which make up about 90 percent of US home sales, came on the heels of data on Wednesday showing housing starts and building permits surged to a more than 12-year high in August. The housing market, which hit a soft patch last year, is being lifted by lower mortgage rates.
But the sector is not yet out of the woods as builders continue to grapple with land and labour shortages, which have constrained their ability to construct more of the sought-after lower-priced homes.
“It appears that the housing market is gaining some momentum as autumn approaches,” said Matthew Speakman, an economist at online real estate database company Zillow. “Even stronger sales volumes may be around the corner given that mortgage rates plummeted in August.”
In a third report, the Philadelphia Fed said its business conditions index fell to a reading of 12.0 in September from 16.8 in August. The survey’s measure of new orders dipped to 24.8 this month from 25.8. – Reuters