US job market shows signs of cooling; housing still struggling
2024.06.20 12:37
(Reuters) -Fewer Americans enrolled for first-time unemployment benefits last week, the Labor Department said on Thursday, though the latest data showed the number of people on benefits rolls overall was the highest since January, a sign that the U.S. job market continues to cool.
Meanwhile, separate data from the Census Bureau showed a housing market that continues to struggle under the weight of the high interest rates engineered by the Federal Reserve. Groundbreaking for new homes and permit applications for future residential building projects both fell in May to the lowest level in about four years.
Initial claims for state unemployment benefits declined 5,000 to a seasonally adjusted 238,000 for the week ended June 15, the Labor Department said. That reversed about a third of the surge in the prior week, which had pushed up claims to a 10-month high.
Economists polled by Reuters had forecast 235,000 claims in the latest week.
Labor market momentum is ebbing in tandem with the overall economy following 525 basis points worth of interest rate hikes from the Fed since 2022 to tame inflation. Loosening labor market conditions have led to inflation pressures subsiding and have financial markets anticipating one or more rate cuts this year despite Fed policymakers’ more hawkish outlook.
The U.S. central bank has maintained its benchmark overnight interest rate in the 5.25%-5.50% range since last July, and at its meeting last week officials revised down the number of rate cuts they anticipate delivering this year to just one quarter-point reduction from a projection of three as recently as March.
The claims data covered the period during which the government surveyed employers for the nonfarm payrolls component of June’s employment report.
Though job growth accelerated in May, that likely overstates the health of the labor market. The unemployment rate rose to 4.0% in May for the first time since January 2022 amid signs that laid off workers could be having a harder time finding new jobs.
Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, could offer more clues on the state of the labor market in June. The so-called continuing claims edged up to a seasonally adjusted 1.828 million during the week ending June 8, the highest since January.
“Initial claims suggest that the gain in nonfarm employment in May won’t be duplicated in June,” Ryan Sweet, chief U.S. economist for Oxford Economics, wrote following the latest jobless claims data. “The risks to the labor market should be garnering attention by the Federal Reserve.”
WEAK HOMEBUILDING
The housing market remains under pressure as the Fed’s stringent policy keeps borrowing costs elevated for home purchases, Census data showed.
Overall housing starts fell 5.5% to 1.277 million units last month, the lowest since June 2020, led by a sharp drop in multifamily projects. Single-family housing starts, which account for the bulk of homebuilding, also slid, declining by 5.2% to a seasonally adjusted annual rate of 982,000 units last month, the lowest since October. Economists polled by Reuters had forecast starts rebounding to a rate of 1.370 million units.
Data for April was revised up to show single-family starts rising to a rate of 1.036 million units instead of the previously reported 1.031 million units.
The average rate on the popular 30-year fixed mortgage has continued to pull back after reaccelerating over 7% again in April and May. It eased to 6.87% in the most recent week, the lowest since April, data from mortgage finance agency Freddie Mac showed on Thursday, as loosening labor market conditions put two rate cuts from the Federal Reserve this year back on the table.
Permits for future housing construction, an indication of projects in the pipeline, tumbled 3.8% – like starts, the lowest since June 2020. Single-family permit filings fell 2.9% to a rate of 949,000 units, the lowest in nearly a year.
Data on Wednesday showed sentiment among homebuilders weakened unexpectedly this month, adding to the downbeat mood.
“The drop in housing starts in May is consistent with the recent slowdown in permit issuance, pointing to construction continuing to falter this year,” said Thomas Ryan, North America economist at Capital Economics.
