Jobless claims rise, underlying trend upbeat

WASHINGTON (BestGrowthStock) – A closely watched gauge of U.S. jobless benefits touched a fresh two-year low last week and pending sales of previously owned homes unexpectedly surged in October, signs the economy had broken out of its summer soft patch.

Initial claims for state unemployment benefits increased 26,000 to a seasonally adjusted 436,000, the Labor Department said on Thursday. However, a four-week moving average — a better gauge of underlying labor trends — fell to its lowest level since the week ending Aug 2, 2008.

Economists had forecast claims rising to 425,000. Although claims bounced off recent two-year lows last week, they remained firmly in ranges considered by economists as consistent with an improving labor market.

“If it continues, we should expect to see better payroll numbers over the next few months,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York. “The core story here is that firmer demand and easing credit conditions for smaller firms are allowing them to hang on to people who might otherwise have been let go.”

In a second report, the National Association of Realtors said its Pending Home Sales Index, based on contracts signed in October, jumped 10.4 percent to 89.3. Economists had expected a decline of 0.5 percent.

U.S. stocks (Read more about the stock market today. ) rose as investors cheered the unexpected rise in pending home sales. Treasury debt prices fell, with the benchmark 10-year notes yield rising over 3 percent for the first time since July.

The claims data has little bearing on Friday’s employment report for November as it falls outside the survey period.

“Taken together, today’s number is a reminder that even in a labor market that is gradually healing, the improvement won’t happen in a straight line,” said Michael Feroli, an economist at JP Morgan in New York.

Anecdotal evidence points to a strengthening in the labor market and the government is expected to report that nonfarm payrolls rose 140,000 last month after increasing 151,000 in October. Other data also continue to indicate a pick-up in economic activity during the fourth quarter.

U.S. retailers reported stronger-than-expected sales for November as shoppers flocked to stores and spent more during the annual discount bonanza known as Black Friday, reports showed on Thursday.

Despite signs of improvement, strains remain in the labor market. The number of people still receiving benefits under regular state programs after an initial week of aid rose 53,000 to 4.27 million in the week ended November 20, above expectations for 4.21 million.

The number of people on emergency unemployment benefits increased 142,874 to 3.94 million in the week ended November 13, the latest week for which data is available.

A total of 8.91 million people were claiming unemployment benefits during that period under all programs. However, the number is set to fall as about 2 million unemployed people will lose their benefits by the end of this month after Congress failed on Tuesday to renew them.

Feroli estimates the loss of benefits could cut household income by 0.2 percent in December with a similar or slightly smaller drag on personal spending.

“The effect on January income and spending would be somewhat larger, in the event that the delay in reinstating benefits lasts that long,” said Feroli.

(Reporting by Lucia Mutikani and Emily Kaiser; Editing by Andrea Ricci)

Jobless claims rise, underlying trend upbeat