Jobless claims drop to 352K, but housing starts drop as well

Two economic indicators delivered unexpected results, but in opposite directions.  First, the number of weekly initial jobless claims fell a stunning 50,000 to 352K, the lowest level in almost four years:

In the week ending January 14, the advance figure for seasonally adjusted initial claims was 352,000, a decrease of 50,000 from the previous week’s revised figure of 402,000. The 4-week moving average was 379,000, a decrease of 3,500 from the previous week’s revised average of 382,500.

The advance seasonally adjusted insured unemployment rate was 2.7 percent for the week ending January 7, a decrease of 0.2 percentage point from the prior week’s unrevised rate.

The advance number for seasonally adjusted insured unemployment during the week ending January 7, was 3,432,000, a decrease of 215,000 from the preceding week’s revised level of 3,647,000. The 4-week moving average was 3,576,250, a decrease of 34,000 from the preceding week’s revised average of 3,610,250.

That’s a pretty dramatic drop, and a change in the opposite direction one would expect for the end of seasonal hiring if the seasonal adjustments were off, as some suspected.  Not surprisingly, Reuters is rather stoked about the news:

New applications for unemployment benefits dropped to a near four-year low last week, a government report on Thursday showed, pointing to continued improvement in the labor market.

The Labor Department said initial claims for state unemployment benefits dropped 50,000 to 352,000, the lowest level since April 2008 and the biggest drop since September 2005. The prior claims data was revised up to 402,000 from the previously reported 399,000.

Economists polled by Reuters had expected claims to fall only to 385,000. Last week’s claims data covered the survey period for January nonfarm payrolls and claims dropped by 14,000 between the December and January survey periods.

A single week is nothing to get excited about, but the previous week’s 402,000 looks more like an outlier in the series, which had been moving to a range of around 360-370K in the weeks preceding it.  That’s better than the 400K range we had for most of 2011, but it’s still above the level correlating to sustained and significant job creation, which is around 325K.  We’ll see what the next few weeks bring, but watch the 4-week moving average, which tends to wring out the momentary swings and give a better picture of the series results.

Meanwhile, the housing market provided a dash of cold water today:

 Housing starts fell in December asgroundbreaking on rental property posted a big decline, splashing some cold water on hopes the still-weak housing sector could boost economic growth this year.

The Commerce Department said on Thursday housing starts fell 4.1 percent to a seasonally adjusted annual rate of 657,000 units.

Economists polled by Reuters had forecast housing starts edging down to a 680,000-unit rate in December.

Rental properties had been a relatively active market over the last few years, thanks to the demand created by people who can’t afford to buy a home any longer.  This could be a problem if it becomes a sustained pattern, especially if foreclosures continue to rise.

• Ireland: Yes, we have sweet international tax incentives, sorry we’re not sorry
• Pelosi: These Republicans are too consumed with “evasions” to worry about the real issue, which is … jobs
• Womp: Eurozone dragging into its sixth straight quarter of recession

Blowback