There was some more good news for the economy this week. New unemployment claims fell to a 5-year low while home construction hit a 5-year high. The recovery is gaining momentum. Let’s hope Congress does not blow it up.
Jobless claims drop to lowest level since 2008
The Labor Department reported Thursday that new unemployment claims dropped by 37,000 to 335,000 for the week that ended Jan. 12. This was a sharp drop down from the previous week's revised figure of 372,000. This is the lowest number since Jan. 19, 2008, a month after the recessional officially began.
The four-week moving average, which provides a better indication of the job market's trajectory, fell by 6,750 to 359,250, a decrease from the previous week's revised average of 366,000. Economists say when applications fall below 375,000, that hiring pace is fast enough to bring down the unemployment rate, which is now 7.8%.
Unadjusted claims usually hit their highest level of the year in mid-January as temporary workers get laid off. But those seasonal layoffs were smaller than expected. That could account for the good news.
Homebuilding back to 2008 levels
On another front, December was the best month for the home building industry in nearly five years. Last month’s totals made 2012 its strongest year since the housing crash in the Bush recession.
The Commerce Department reported Thursday that new housing starts rose 12.1% to a seasonally adjusted annual rate of 954,000 units last month, the highest level since June 2008. This was 28.8% higher than the December 2011 estimate of 701,000.
In 2012, homebuilders started work on 780,000 homes up from 608,800 in 2011. This an increase of 28.1% from 2011, the highest level since 2008. The report shows that the housing market is finally making a comeback. The housing industry ideally should produce 1.5 million new homes a year to be robust, but these steady increases are encouraging.
The biggest jump was in multi-family dwellings which rose a seasonally adjusted 23.1%. Single family home starts rose 8.1%.
NAHB senior economist Robert Denk told The Hill "Multifamily production is almost back to normal levels and while single-family starts still have a way to go, they are gaining momentum,"
"This trend could be even stronger if not for persistently tight credit conditions for home buyers, flawed appraisal values and uncertainties regarding economic policy debates in Washington."
Regarding single family home starts, Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fl. told The Hill:
"Builders have become increasingly optimistic about conditions in local housing markets in recent months and this report underscores that the housing recovery is well on its way.
With inventories of new homes at razor thin levels, builders are moving prudently to break ground on new construction ahead of the spring buying season to meet increasing demand."
New housing starts were up across all four regions of the country. In the Northeast they rose 21.4%; 24.7% in the Midwest; 3.8% in the South; while in the West they jumped 18.7% according to the Commerce Department figures.
The immediate future looks good also as applications for building permits remained steady, up slightly to a rate of 903,000, inching closer to that magic 1.5 million. Regionally, permits rose 19% in the Northeast and 6.6% in the West. The South dropped 3.4% and Midwest declined 5.7% however.
Friday when Republicans hinted they may not force the nation to default on its debt—at least for 3 months, the stock markets rose. One thing that could reverse the drop in jobless claims or stifle homebuilding is if Republicans in Congress hold the nation hostage over the debt ceiling or shut the government down as many have expressed a desire to do.
Let’s enjoy the good news while we can.
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