Jobless Claims Rise and Housing Starts Fall

Jobless claims rose sharply last week, while housing starts tumbled in April and a gauge of underlying inflation pointed to weak demand.

The data could feed fears over the impact of a government austerity drive that began in January and could also raise pressure on the Federal Reserve to continue to buy bonds to support the economy.

The number of Americans filing new claims for unemployment benefits climbed last week at the fastest pace in six months, the Labor Department said on Thursday. Initial claims for state unemployment benefits jumped by 32,000 to 360,000. That was the biggest jump since November and confounded analysts’ expectations for a more modest increase.

“I think there’s plenty of slack in the labor market,” said Tanweer Akram, an economist with ING U.S. Investment Management in Atlanta.

Futures indexes for United States stocks turned lower after the data’s publication, and so did yields on government debt. The dollar weakened against the euro and the yen.

A Labor Department analyst said no states had estimated their data, and there were no signs that furloughs for government employees had played a significant role in last week’s increase in claims.

The economy has shown signs that growth slowed late in the first quarter and in April as Washington’s push to trim the budget deficit weighed on consumers and businesses. The federal government raised taxes in January, and sweeping budget cuts were initiated in March.

Many analysts have noted that a reluctance by employers to lay off workers has made an outsize contribution to recent improvements in employment levels. Last month, employers added 165,000 new jobs while the unemployment rate dropped to a four-year low at 7.5 percent.

Housing has also been an economic bright spot, but a separate report showed groundbreaking for new homes fell more than expected in April. The Commerce Department said starts at building sites for homes fell 16.5 percent last month. Still, permits to build new homes increased, a reassuring indication that the housing sector could still contribute to the economic recovery.

In a third report, a sharp drop in gasoline costs led consumer prices to tumble in April by the most in over four years, while a gauge of underlying inflation was also weak.

The Labor Department said its Consumer Price Index slipped 0.4 percent, the biggest decline since December 2008 when America was suffering some of the worst days of its financial crisis. Analysts had expected a more modest 0.2 percent decline in last month’s prices.

In the 12 months through April, consumer prices rose 1.1 percent. That is well below the Fed’s 2 percent inflation goal. Much of April’s decline in prices was because of an 8.1 percent dive in gasoline costs, the biggest since December 2008.

Article source: http://www.nytimes.com/2013/05/17/business/jobless-claims-rise-and-housing-starts-fall.html?partner=rss&emc=rss