US Economy Anchored by Strong Factory, Housing Sectors While Labor Market Recovery Fades

Fresh U.S. economic data released on Thursday showed an economy slowly getting some traction, with slightly better-than-expected initial jobless claims, upbeat housing starts data, and a higher factory index for the mid-Atlantic region.

US Weekly Jobless Claims Decline Moderately

The number of Americans filing new applications for unemployment benefits decreased modestly last week as the COVID-19 pandemic tears through the nation, raising the risk that the economy shed jobs for a second straight month in January.

Initial claims for state unemployment benefits fell 26,000 to a seasonally adjusted 900,000 for the week-ended January 16, the Labor Department said. Economists polled by Reuters had forecast 910,000 applications in the latest week.

Some of the elevation in claims reflects people re-applying for benefits following the government’s recent renewal of a $300 unemployment supplement until March 14 as part of the nearly $900 billion in additional fiscal stimulus.

Mid-Atlantic Manufacturing Rebounds in January:  Philadelphia Fed

A gauge of manufacturing activity in the U.S. Mid-Atlantic region rebounded in January to its highest level in eight months and the outlook is the brightest in more than a year and a half, the Federal Reserve Bank of Philadelphia said on Thursday.

The regional Fed bank’s business conditions index rose to 17.0 from an upwardly revised 2.4 in December. That easily topped expectations for a reading of 3.8 in January, according to a Reuters poll of economists.

The six-month outlook rose to 38.4, the highest since May 2018, from 34.8 last month. The new orders, employment and prices paid indexes all showed improvement.

US Housing Starts, Building Permits Accelerate

U.S. homebuilding and permits surged in December as historically low mortgage rates supported the housing market, but momentum could slow amid surging lumber prices and a shortage of labor.

Housing starts jumped 5.8% to a seasonally adjusted annual rate of 1.669 million units last month, the Commerce Department said on Thursday. Economists polled by Reuters had forecast starts would rise to a rate of 1.560 million units in December. Homebuilding increased 5.2% on a year-on-year basis. Starts totaled 1.380 million in 2020, up 7.0% from 2019.

Permits for future homebuilding accelerated 4.5% to a rate of 1.709 million units in December. Permits, which typically lead starts by one to two months, totaled 1.452 million last year, a 4.8% increase from 2019.

Single-family homebuilding, the largest share of the housing market, soared 12.0% to a seasonally adjusted annual rate of 1.338 million units. Single-family starts have increased for eight straight months.

Single-family building permits raced 7.8% to a rate of 1.226 million units in December. Homebuilding is being supported by lean inventories, especially for previously owned homes.

For a look at all of today’s economic events, check out our economic calendar.