US housing starts jump; weekly jobless claims fall

Homebuilding was up 6.2pc last month compared with February 2016. Job growth has averaged 209,000 per month over the past three months

PUBLISHED : Thursday, 16 March, 2017, 10:20pm
UPDATED : Thursday, 16 March, 2017, 10:20pm

US homebuilding jumped in February as unseasonably warm weather boosted the construction of single-family houses to near a nine and a half year high, suggesting the economy remains on solid ground, despite an apparent slowdown in the first quarter.

Other data on Thursday showed a drop in the number of Americans filing new applications for unemployment benefits last week, pointing to a further tightening in the labour market.

The fairly upbeat data came a day after the Federal Reserve raised interest rates for the third time since the 2008 financial crisis. Fed Chair Janet Yellen told reporters that the US central bank was sending a message that “we have confidence in the robustness of the economy and its resilience to shocks”.

Housing starts increased 3.0 per cent to a seasonally adjusted annual rate of 1.29 million units last month, the Commerce Department said. Economists had forecast groundbreaking activity rising to a rate of 1.26 million units.

Homebuilding was up 6.2 per cent compared to February 2016. Single-family homebuilding, which accounts for the largest share of the residential housing market, surged 6.5 per cent to a pace of 872,000 units last month, the highest level since October 2007. Single-family starts rose in the West, Northeast and Midwest, but fell in the South.

Starts for the volatile multi-family housing segment fell 3.7 per cent to a pace of 416,000 units.

A robust labour market is supporting the housing market, helping it to buck weakness in other parts of the economy.

In a separate report, the Labor Department said initial claims for state unemployment benefits dropped 2,000 to a seasonally adjusted 241,000 for the week ended March 11.

It was the 106th straight week that claims remained below 300,000, a threshold associated with a healthy labour market. That is the longest stretch since 1970, when the labor market was much smaller. The labour market is near full employment.

Job growth has averaged 209,000 per month over the past three months and the unemployment rate is at 4.7 per cent, close to the nine-year low of 4.6 per cent hit last November.

Prices of US Treasuries were lower on Thursday while US stock index futures were trading higher. The dollar was weaker against a basket of currencies.

The Fed on Wednesday raised its overnight benchmark interest rate by 25 basis points to a range of 0.75 per cent to 1.00 per cent and forecast two more rate hikes this year.

Labour market strength is in stark contrast with a recent softening in consumer, construction and business spending.

The Atlanta Fed is forecasting gross domestic product increasing at a 0.9 per cent annualised rate in the first quarter. The economy grew at a 1.9 per cent rate in the fourth quarter.

In February, permits for future home construction fell 6.2 per cent to a rate of 1.21 million units. But single-family permits increased 3.1 per cent to a pace of 832,000 units.

Building permits for multi-family units dropped 21.6 per cent to a rate of 381,000 units. Single-family permits are likely to remain higher. A survey on Wednesday showed homebuilders’ confidence jumped in March to its highest level since June 2005.

The surge in confidence is, however, unlikely to translate into a homebuilding boom as builders continued to complain about rising material prices, higher mortgage rates, and shortages of lots and labour.

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