U.S. home building projects started in December fell by 14.2 percent to the lowest pace in
more than 16 years and more sharply than economists expected while building permit activity, a sign of future construction plans, also dropped to levels not seen since early 1993, a
government report showed.
But the number of workers filing initial claims for U.S. jobless benefits fell unexpectedly by
21,000 last week, suggesting some improvement in the health of the labor market.
"The surprising drop challenges the facile assumptions that declines in the two previous weeks were due to holiday effects," David Resler, chief economist at Nomural International, said in his daily economic analysis note. "The much lower claims in the latest report also suggests the job market may not be as severely impacted by the on-going housing slump as has been assumed."
The recent trend in weekly jobless claims suggest that the job market is not pointing to a recession, even though the unemployment rate jumped sharply to 5.0 percent in December.
The Commerce Department said housing starts set an annual pace of 1.006 million units in December, lower than the 1.140 million units expected by economists. It was the lowest pace
for housing starts since the May 1991 rate of 996,000 units.
The 1.354 million units started in all of 2007 was the lowest total since 1.288 million units in 1993.
Building permits fell 8.1 percent to an annual rate of 1.068 million, the slowest pace since a 1.056 million unit rate set in March 1993. It was also the sharpest monthly drop since
January 1995. Economists polled by Reuters had forecast December permits at 1.140 million units after the 1.162 million rate of November.
Though the numbers looked dreadful on a headline basis, some economists cautioned about reading too much into them.
"The plunge in housing starts today excluded the South, the one region where winter is kind," noted Robert Brusca, chief economist at FAO Economics. "It was a bad December for housing. We say winter housing reports are more weather report that economic report. Starts in the South still fell but did not plunge. Let’s not exaggerate what is going on there, in housing."
Brusca is among those economists who say deterioration in the housing market is probably slowing, even if it has yet to bottom.
First-time claims for state unemployment insurance benefits fell for the third straight week, tumbling to 301,000 in the week ended Jan. 12 from 322,000 for the prior week and to its
lowest since Sept. 22, the Labor Department said.
The fall in new claims defied a Wall Street forecast for a rise to 335,000 from the originally reported 322,000 in the week ended Jan. 5.
The four-week moving average of new claims -- a better gauge of labor market trends because it irons out volatility in the week-to-week figures -- also fell sharply for the third
straight week, dropping to 328,500 from 340,250 the prior week.