Unemployment applications fell in the USA, housing starts fell to the lowest level in the last 4 years

In the latest economic updates, the US labor market painted a mixed picture, with new unemployment claims falling slightly and the number of people receiving unemployment benefits reaching the highest level since January. The Labor Department reported Thursday that primary jobless claims for the week ending June 15 decreased by 5,000 to a seasonally adjusted 238,000. This decrease partially offset the significant increase in the previous week, when applications reached the highest level in the last 10 months.

Despite this decline, economists were expecting 235,000 new job applications this week. The general cooling in the labor market reflects the impact of the 525 basis point interest rate increase that the Federal Reserve has made since 2022 with the aim of controlling inflation. Although these measures have led to expectations of potential rate cuts later this year, Fed policymakers recently predicted just a quarter-point cut, ahead of the three projected rate cuts in March.

Unemployment claims information coincided with the survey period for the nonfarm employment component of the June employment report. Although employment growth recovered in May, the unemployment rate rose to 4.0%, indicating that laid-off workers may have difficulty finding new jobs. Continuing unemployment claims rose to 1.828 million in the week ending June 8, the highest level since January.

Ryan Sweet, chief US economist at Oxford Economics, stated that the increase in non-farm employment in May may not be repeated in June and said that the Federal Reserve should pay attention to the risks to the labor market.

The housing sector continues to face challenges, with new data from the Census Bureau revealing a permanent decline. Housing starts decreased by 5.5% in May to 1.277 million units, the lowest level since June 2020. Single-family housing starts also decreased by 5.2%, falling to a seasonally adjusted annual rate of 982,000 units, the lowest level since October. This was contrary to expectations, as economists had predicted a recovery of 1,370 million units.

According to Freddie Mac, the average rate on a 30-year fixed mortgage dropped to 6.87%, the lowest level since April. This drop in mortgage rates comes amid speculation about possible interest rate cuts by the Federal Reserve due to a softening labor market.

Permit applications for future residential construction decreased by 3.8%, while single-family permit applications decreased by 2.9%, falling to 949,000 units, the lowest level in nearly a year. The decline in housing starts is consistent with the recent slowdown in permitting and points to a continued decline in construction activity for the year, said Thomas Ryan, North America economist at Capital Economics.

Reuters contributed to this article.

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