U.S. Weekly Jobless Claims Fall; Housing Starts Rebound In February

The number of Americans filing new claims for unemployment benefits fell last week as demand for labor remained strong, positioning the economy for another month of solid job gains.

Unemployment rolls were the smallest in 52 years in early March, the Labor Department's weekly jobless claims report on Thursday also showed.

"Through some of the noise in weekly figures, filings have been coming in at pretty low levels in recent weeks, suggesting that the labor market is strong," said Daniel Silver, an economist at JPMorgan in New York.

Initial claims for state unemployment benefits decreased 15,000 to a seasonally adjusted 214,000 for the week ended March 12. Economists polled by Reuters had forecast 220,000 applications for the latest week.

Claims have dropped from a record high of 6.149 million in early April 2020. Russia's three-week old war against Ukraine poses a risk to the U.S. labor market through disruptions of supply chains and higher gasoline prices. But economists are optimistic the labor market and economy will ride out the storm.

"The Russian invasion of Ukraine adds some uncertainty to the outlook as energy prices have spiked, and business and consumer sentiment has taken a hit," said Dante DeAntonio, a senior economist at Moody's Analytics in West Chester, Pennsylvania. "However, we expect firms to mostly look beyond the near-term volatility, especially given the difficult hiring environment that remains."

There were 11.3 million job openings at the end of January, with a record 1.8 open positions per unemployed person. This misalignment between demand for labor and supply is boosting wage growth, contributing to high inflation.

The Federal Reserve on Wednesday raised its policy interest rate by 25 basis points, the first hike in more than three years, and laid out an aggressive plan to push borrowing costs to restrictive levels by 2023.

Fed Chair Jerome Powell described the labor market as "extremely" tight, telling reporters that "we think this labor market can handle, as I mentioned, tighter monetary policy, and the overall economy can as well."

SHRINKING UNEMPLOYMENT ROLLS

Last week's claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of March's employment report. Claims fell considerably between the February and March survey periods.

The economy created 678,000 jobs in February. Employment growth has been aided by the return of some workers to the labor force amid a significant decline in COVID-19 infections.

The claims report also showed the number of people receiving benefits after an initial week of aid dropped 71,000 to 1.419 million during the week ended March 5. That was the lowest level for these so-called continuing claims since February 1970.

Other data from the Commerce Department on Thursday showed housing starts jumped 6.8% to a seasonally adjusted annual rate of 1.769 million units in February, the highest level since June 2006. Economists had forecast starts rebounding to a rate of 1.690 million units.

While permits for future home construction fell 1.9% to a rate of 1.859 million units, they were not too far from the nearly 16-year high touched in January. That suggested an acute shortage of houses will continue to underpin residential construction even as mortgage rates rise.

Single-family housing starts, which account for the biggest share of homebuilding, jumped 5.7% to a rate of 1.215 million units last month. Single-family homebuilding increased in the Northeast, Midwest and South, but fell in the West.

There is a huge backlog of houses approved for construction that are yet to be started as builders struggle with shortages and very expensive materials. The National Association of Homebuilders said on Wednesday its measure of single-family homebuilders confidence fell to a six-month low in March. Its gauge of future sales was the lowest since June 2020.

Single-family building permits slipped 0.5% to a rate of 1.207 million units in February.

Starts for housing projects with five units or more gained 0.8% to a rate of 501,000. Building permits for this housing segment dropped 4.5% to a rate of 597,000 units.