New U.S. 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.
Housing starts fell in December as groundbreaking on rental property posted a big decline, splashing some cold water on hopes the still-weak housing sector could boost economic growth this year.
Consumer prices were flat for a second straight month in December as gasoline fell and food rose moderately, government data showed on Thursday, suggesting scope for further monetary easing should economic growth falter.
ACK DE GAN, CHIEF INVESTMENT OFFICER AT HARBOR ADVISORY CORP IN PORTSMOUTH, NEW HAMPSHIRE
It resets the trend and creates some confidence in markets. It reestablishes confidence in the fact that we are running at a sustainable 375,000-380,000 and that is commensurate with about 200,000 non-farm payroll jobs (in the) private sector.
GREG ANDERSON, SENIOR CURRENCY STRATEGIST, CITIGROUP, NEW YORK
The broad-brush impression from the data is that it's a Goldilocks setup: inflation tame, but economic growth showing signs of accelerating. Probably the thing that stands out most in that regard is the weekly claims data. 352 (thousand) on claims -- it's been a long time since we've seen anything that low. Existing claims, that continues to drop too.
LINDSEY PIEGZA, ECONOMIST, FTN FINANCIAL, NEW YORK
Right in line with expectations, which is continuing this deflationary trend. Just keep in mind the Fed was very vocal in their intent not even to look at a third round of quantitative easing unless a deflationary environment returned, and that does seem to be happening. We seem to be sliding toward another round of quantitative easing or at least more accommodative policy.
The consumer is on very fragile ground.
Housing continues to bounce along at the bottom, suggesting that housing is not going to recover for several years to come. If we are relying on housing to drive this recovery it seems we will continue on this tepid path for a very long time.
It does seem we've moved into a lower range. Clearly we've been maintaining a level well below 400,000, but it's still well above the level of destruction we'd like to see in the jobs market.
OMER ESINER, CHIEF MARKET ANALYST AT COMMONWEALTH FOREIGN EXCHANGE IN WASHINGTON
I think what sticks out most is the large drop in jobless claims, the biggest drop since September 2005. We have to see if there are some seasonality issues involved here, but on the surface this number looks to be very positive and is pretty much consistent with other data we've seen recently that suggest improvement in underlying fundamentals in the U.S., and I think this should in the very near term add to the overall appetite in risk appetite that we're seeing in markets.
The CPI data was kind of benign and the housing starts were a little weaker than expected but again this is a little bit of a give-back from the sharp rise in the previous month. Overall, pretty decent, I would say. This is consistent with the recent U.S. figures that we have that shows an accelerating recovery.
The question is what does this do for the dollar. On the surface given the generally improved tone we've seen in the markets, this will in the near term add to risk appetite and could be a negative for the dollar. But as the dust settles we'll continue to focus on the fact that the U.S. is outpacing most of its G10 counterparts. I think this bodes well for the yield outlook for the dollar, especially against the euro. It's a contrast to most of the deteriorating data out of Europe.
DAVID SLOAN, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS
December housing starts were weaker than expected with a 4.1% fall to 657k, while permits at 679k were down a marginal 0.1% and near the 680k level the market had expected for both series. The starts decline was however fully due to a correction lower in multiples, with single starts seeing a 3rd straight rise, by 4.4%, to their highest level since April 2010. Singles outperformed in the permits breakdown too, with a rise of 1.8%. Multiples data is volatile and an uptrend remains clearly established. The gains in the single family sector add to growing evidence that recovery in the housing sector is moving beyond multi-family rental units. Despite the December decline, December's housing starts level is higher than in any month of 2011 apart from November, when starts surged by 9.1%, putting December's fall in context. The December figure is up 24.9% from a year ago and even single starts are up 11.6% yr/yr. Overall starts are up by close to 30% annualized for the second straight quarter. The levels are still weak, and housing has shrunk to such an exceptionally low proportion of GDP by historical standards that the impact on GDP growth will still be modest, but momentum does appear to be building.
LIAM DALTON, PRESIDENT OF AXIOM CAPITAL MANAGEMENT INC IN NEW YORK
I don't think these are market moving numbers. They're pretty much going in the same direction we've seen over the past six weeks, showing gradual improvement in the employment picture. Nothing spectacular, but the trend is improving. Inflation is obviously not a problem, so that gives the market some encouragement. Housing starts were close enough to in line, so I don't see this as being a major market mover.
VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS
Today's unemployment insurance release shows that both the number of people filing their first claim to qualify for unemployment benefits as well as those still seeking assistance as they search for work, dropped dramatically within a week, as first-time filers fell to 352,000 people in the week ending January 14 (a difference of 50k) and continuing claims fell to 3.432mln in the week ending January 7.
The market did expect claims to come down from the prior reading of 399k (now 402k)when claims rose by 24k (now 27k) because SA claims typically do correct (meaning fall just as quickly they rose) when the first report of a new year shows NSA claims rising to its highest level-- but the expectation was not to this extent. Unadjusted claims fell over twice as much as seasonally projected (125k vs 52k), and the seasonally adjusted level fell to its lowest reading since April 2008. Although this substantial drop of 50k is not likely to continue, the movement does help to put the comparison of filing behavior before the Wall St meltdown back into circulation.
Consumer price movement in December was similar to producer price movement made public yesterday in that falling gasoline prices were a drag on the headline as the CPI was flat (for the second month), while core CPI inched up 0.1% over the month. Prior to these two readings of immaterial price changes, the CPI was down 0.1% in October, a month also influenced by a negative energy component and core CPI rose 0.1% (just rose 0.2% in November). For the three consecutive months that energy prices have fallen, the CPI either fell or showed no change as energy's movement outweighed rising prices in other indices. In the past 12 months the CPI rose by 3%, which is lower than November's annual growth of 3.4% (third month of decelerated annual growth), but the real annual comparison showing the influence of commodity spike is the 12-month change in the energy index which is down to 6.6% yr/yr when it had been 19.3% just three months earlier in September. Energy prices fell 1.3% after having fallen 1.6%. Every commodity was responsible as gasoline was down 2% and natural gas down 0.8%. Food prices skipped up 0.2% with both food at and away from home showing gains of 0.3% and 0.2% respectively. Excluding these volatile goods, prices rose 0.1% with support from services (medical care up 0.4% and shelter up 0.2%)while goods such as cars reported lower prices (used cars down 0.9% and new cars down 0.2%).
(Americas Economics and Markets Desk)