By Denny Gulino
WASHINGTON (MaceNews) – While hope for a significant rebound in new-home starts was again deferred Thursday, initial claims for jobless benefits continued the year’s trend of improvement, reinforcing the view that full employment may not have reached its potential peak in this cycle of expansion.
The pace of housing starts did not come close to the increase expected, rising but only by 0.9% in the Commerce Department report for the generally good-weather month of July. The annual rate was 1.168 million, 1.4% lower than a year earlier.
Builders for years now have failed to overcome a long list of handicaps that keep them from meeting demand, from labor and land shortages to price pressures for materials, some of which are increasingly prone to retaliatory trade tariffs. Escalating mortgage rates are adding to the headwinds.
Starts were running behind completions, which were at an annual rate of 1.188 million in the month. That’s very roughly analogous to an inverted yield curve in the credit markets, suggesting the market for new housing, particularly in single family houses, is inexplicably past its peak despite evidence of more than ample demand such as historically high rates of home price increases across the country.
At least single-unit housing was up from a year earlier, not the case for apartment buildings, down 9.6%. A housing start is that point in the project at which construction is about to begin. Housing units actually under construction were at an annual rate of 1.122 million in July.
Housing starts of at least 1.5 million is seen to be closer to the rate necessary to keep up with demand and population growth. But in order to catch up with pent-up demand, an even higher rate of production is called for, say analysts.
Permits were being granted at a higher rate than starts in July, 4.2% above a year earlier at 1.311 million annual rate. Permits do not necessarily anticipate the level of starts in the month ahead.
New claims for unemployment benefits kept to a chart trajectory of improvement at about the same inclination as throughout the past year, suggesting layoffs continue to diminish despite the long road of improvement up to now. Weekly claims are just slightly higher than April’s low point since the Great Recession, at 215,000 for the week ending five days ago, little different from the four-week average at 215,500.
Also out Thursday, the Philly Fed survey index of perceived general economic momentum in the region in August stayed positive but dropped sharply to its lowest level in 21 months, to 11.9. But the diffusion index for activity anticipated six months out kicked up after four previous months of decline.
Thursday morning’s stock indices were buoyed if not ebullient over Walmart’s booming quarter and in anticipation of a China trade delegation coming to the United States after a U.S. delegation sent to Beijing earlier failed to make any progress. This time Treasury’s international affairs expert David Malpass, an experienced Asia hand, is shepherding the visitors rather than the Treasury secretary and National Economic Council chief who handled the first round.