US Economy News Today: Initial Jobless Claims Fall From Prior Week's Spike

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Home Starts and Permits Miss Expectations in April

56 minutes ago

Homebuilding activity missed expectations as high mortgage rates continued to drag down the market. 

Builders started building houses in April at a rate that would see 1.36 million units constructed if that pace continued all year, the Census Bureau said Thursday. That is a 5.7% increase from March but below expectations for an annual rate of 1.40 million according to a survey of forecasters by Dow Jones Newswires and The Wall Street Journal.

Building permits, a signal of future activity, fell 3% from March to an annual rate of 1.44 million, short of the consensus forecast for 1.48 million.

Housing starts are usually taken with a grain of salt by economists because they’re prone to large up-and-down swings from month to month. However, they’re the latest of several indicators that high mortgage rates are stifling the housing market.

The average rate offered for a 30-year mortgage has hovered over the 7% mark in recent weeks, according to Freddie Mac, close to a two-decade high. The Federal Reserve has held its benchmark fed funds rate high to combat inflation, which influences all kinds of credit including mortgages. High mortgage rates have helped raise required monthly payments to the point of unaffordability for many prospective buyers. 

The Fed’s monetary policy intentionally raises borrowing costs on mortgages and other loans in an attempt to discourage borrowing and spending, cool the economy, and push inflation down to a 2% annual rate from its current level of 3.4%.

“Restrictive monetary policy clearly continues to weigh on housing activity as housing starts have essentially been stuck in a sideways pattern around 1.4 million since the summer of 2022,” Ali Jaffery, an economist at CIBC, wrote in a commentary. “That trend is likely to continue until the Fed is confident inflation is headed for 2%.”

Initial Claims For Unemployment Insurance Fell Last Week

1 hr 15 min ago

The number of people filing for unemployment insurance for the first time fell by 10,000 last week, according to data released by the Department of Labor Thursday.

Initial claims fell to 222,000, down from the prior week’s revised level of 232,000. The volatile weekly measure often used as a proxy for layoffs has fluctuated around the 200,000 mark so far this year.

The four-week moving average, which some economists site as a more stable figure, rose to 217,750, some 2,500 more than in the previous week.

Some economists said last week’s jump was caused mainly by an anomaly in New York schools.