The reports on Thursday showed the economy was weathering an uncertain fiscal environment surprisingly well. Still, growth in the fourth quarter was most likely subdued, and only a modest pickup was expected in the first three months of this year.
“While growth has been slow, the damage done from the uncertainty surrounding the fiscal cliff was not sufficient to topple the recovery,” said Millan Mulraine, a senior economist at TD Securities in New York.
The fiscal cliff refers to deep government spending cuts and tax increases, many of which were avoided after a last-minute agreement in Congress. A fight over raising the government’s borrowing limit looms.
Initial claims for state unemployment benefits fell 37,000 to a seasonally adjusted 335,000, the lowest level since January 2008, the Labor Department said on Thursday. It was the largest weekly drop since February 2010, ending four straight weeks of increases.
While problems adjusting the data for seasonal fluctuations might have exaggerated the size of the decline, economists said the report still suggested an improvement in the labor market and the economy as a whole.
“Having taken a pinch of salt, however, we would suggest that the trend in claims generally show no pickup in layoff activity around the turn of the year,” said John Ryding, chief economist at RDQ Economics in New York.
A separate report from the Commerce Department showed housing starts jumped 12.1 percent last month to their highest level since June 2008. Permits for home construction were also the highest in about 4 1/2 years.
The data was confirmation that the housing market was improving, aided in part by favorable weather, with gains in home building across all four regions in the survey. Groundbreaking increased for both single-family homes and multifamily units.
Housing appeared to no longer be a drag on the economy and residential construction was expected to have contributed to growth last year for the first time since 2005.
The jobs and housing data helped United States stocks surge. The reports came on the heels of data this week showing solid retail sales and manufacturing growth in December.
Still, the outlook for the economy remains shaky. A report showed that factory activity in the mid-Atlantic region had contracted this month as new orders tumbled, pointing to a cooling in manufacturing activity.
The Philadelphia Federal Reserve Bank said its business activity index fell to minus 5.8 from minus 4.6 in December. A reading below zero indicates contraction in manufacturing in eastern Pennsylvania, southern New Jersey and Delaware.
“Manufacturing has slowed but it’s still growing,” said Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh. “I’m not going to read too much into this until I see other regional surveys.
Article source: http://www.nytimes.com/2013/01/18/business/economy/claims-for-jobless-benefits-drop.html?partner=rss&emc=rss