Jobless claims and housing starts blew past forecasts in the most recent reports released Thursday, both showing stronger-than-expected results amid a looming economic downturn.
New jobless claims fell by 20,000 last week to 192,000 following an unexpected spike in the previous week, according to Labor Department data. Our preferred measure of claims data, the 13-week moving average, which helps smooth out volatility, remained below the pre-pandemic level.
The underlying trend in jobless claims continued to imply a still-strong labor market where jobs are plentiful and workers have little incentive to file for unemployment benefits.
As the leading indicator for important data like the March job report, the claims numbers should suggest another likely solid month of job gains.
Housing starts and permits
In a separate report on Thursday, released by the Census Bureau, housing starts and permits posted a significant upside surprise as new residential starts rose by 9.8% while permits increased by 13.8% in February.
The main factors were most likely the drop in mortgage rates to 6% at the beginning of February, in addition to the improvement in builders’ sentiment in recent months after reaching bottom in December.
It is important not to overinterpret one month’s data because a similar spike in housing starts took place last August, when mortgage rates dipped before housing starts resumed their downward trend until January.
On the other hand, there are reasons to believe that we might have seen the worst in terms of a housing correction as the Federal Reserve weighs in on an earlier-than-expected pause in its rate hikes amid multiple bank failures last week. The European Central Bank raised its deposit rate by 50 basis points on Thursday to 3%.
In any case, the increase in housing starts and permits is welcome with the prospect of a recession approaching. Together with important recent data on retail sales, employment and spending, the increase in housing starts and permits should continue to add to the chance that our gross domestic product forecast of 1.9% growth for the first quarter comes in higher than expected.