In the latest data to suggest an economic recovery, separate reports were posted that reveal a decline in unemployment claims and a spike in home construction permits: Unemployment claims dropped 5,000 to 388,000, while building permits for housing development soared to nearly 11% last month to a seasonally adjusted annual rate of 653,000.
As the US begins its economic recovery, the European debt crisis and rising gas prices remain two major obstacles to growth. Despite these promising figures, Europe's debt kept global stocks low.
The Dow Jones fell 134 points, while the Nasdaq Composite dropped 51points, and the Standard & Poor's 500 index shed 20 points late last week. As Treasury debt slumped, the dollar maintained slight change against a basket of currencies. The Canadian dollar rebounded from the slump due to the jobless figures, while the US dollar fell before the data was released.
Economists told Reuters that they believe fourth-quarter growth could exceed an annual figure of 3%, up from a third-quarter growth of 2.5%.
Higher Hopes For Employment
According to the latest Labor Department figures, claims for unemployment benefits in mid-November fell to the lowest level in seven months, with first-time claims down by 16,000 individuals between October and November.
The unemployment benefits received under state programs have also fallen to a 3-year low. The Labor Department has observed four consecutive weeks of unemployment figures below the 400,000 mark for the first time since April. The federal government will release its updated job count on December 2.
The stagnant labor market has been one of the most trying roadblocks to economic recovery, holding a 9% unemployment rate for over two years. Employers are now hiring more workers and adding more hours per worker. Senior US Economist for Deutsche Bank Securities Carl Riccadonna foresees the improvement in jobless claims could indicate that the economy is now “shifting into higher gear.” He says employment is very likely to pick up pace in the next few months.
Housing Market Improvements
Permits for home building rose 11% last month, with the Midwest reporting a home-building gain of 9.7% while the West fell 16.5%.
Record-low mortgage rates and more affordable housing are helping improve the industry that initiated the previous recession. Construction permits for buildings holding a minimum of five units have risen to their highest level in three years as more Americans turn to renting.
While new construction slumped 0.3%, new single-family home construction rose by 3.9% to a three-month high of 430,000 last month, providing signs of stability in the housing market. Three of the four major regions showed improvement in the housing market, with the Northwest clocking the largest increase at over 17%.
According to the National Association of Home Builders, builder sentiment has improved to 20 this month, a new high since May 2010. The trade group believes low mortgage rates are the primary cause in the improved index. Any reading below 50 indicates negative sentiment.
Unfortunately, home-builders have not experienced anything above 50 since April 2006 at the peak of the housing bubble. Last year, the rate of buyers purchasing new homes fell to a record low that has not been seen in nearly half a century, but home builders are more optimistic that newly built homes will sell this year.
Key Statistics – US Employment (source: US Department of Labor)
- On average, manufacturing workers worked an additional 0.2(p) each week in October.
- Total Private Aggregate Weekly Hours improved by 0.1%(p) last month.
- Nonfarm Payroll Employment grew by 80,000(p) in October.
- Last month, the Total Private Average Hourly Earnings grew $0.05(p).