The economy showed strong trending as new U.S. joblessness claims were at a 7th month low last week. Home construction in October was also strong although Mid-Atlantic region factory activity paced slower on weak orders. Still, employment rose and working hours were increased.
Naroff Economic Advisors’ Joel Naroff said that economic conditions are accelerating at an upward movement. But he added that 2 major roadblocks, rising oil prices and European debt issues, hinder solid growth. The Labor Department said initial unemployment benefit claims were down by 5,000 to 388,000 – its 4-week average that is below the 400,000 mark. Job data included November government employment count. This caused hope that hiring increased this month after October’s 80,000 payroll increases. Survey showed initial claims between October and November which fell 16,000. Government job count is due on December 2.
RDQ Economics’ chief economist John Ryding expects employment growth pickup along with a continued pattern of upward revision to the prior two months. The 9% unemployment rate in the weak labor market has been a stronger economy stumbling block. There were signs of growth in housing though, as home building permits up by 10.9% to a seasonally adjusted annual rate of 653,000 in October. Despite the 0.3% dip in new construction against annual an rate of 628,000 units, economists expect growth due to higher demands for rentals which will boost construction. In October, building permits for 5-units or more was up to its highest in 3 years.
Europe’s debt issues, however, overshadowed the stronger data on Wall Street. At midday, U.S. stocks traded lower while Treasury debt prices were down. The dollar hardly moved but growth trend in retail sales and industrial production reduced new recession threat. Economists believe the 4th quarter growth would be higher than July to September’s 2.5%, higher than an annual pace rate of 3%. The recovery may be disrupted by Europe’s crisis but it will not hit the U.S. economy hard, said St. Louis Federal Reserve Bank President James Bullard, not unless it blows up in a big disorderly way. If it just tumbles along for a long time, which is likely, there’ll be not much feedback to the U.S., added Bullard.
The Philadelphia Federal Reserve Bank’s business activity index dropped from October’s 8.7 to 3.6 this month. Employment sub-index rose to a 6-month high while the average workweek index was 3 times higher. National manufacturing’s above zero reading is an activity expansion sign but should not always be taken as a good indicator. The improved labor market was highlighted by the claims drop in week ended November 5, the lowest in 3 years.