Builders Showing More Confidence, Labor Markets Firming
- Housing Starts for October decreased to a better-than-expected 628,000 unit annual rate.
- Permits for new residential construction increased to 658,000 units, the most since March 2010.
- Initial Claims for Unemployment Insurance fell by 5,000 to hit 388,000, showing ongoing improvement.
- The Philadelphia Fed Manufacturing Survey showed slowly improving conditions in early November.
Builders are feeling a little more confident after a shaky beginning of 2011. Even though housing starts dipped by 0.3 percent in October, to an annual rate of 628,000 units, the dip was smaller than expected and will be counted as a win for the month. Last month September housing starts were initially reported to have been very strong, up 15 percent for the month. It was feared that we would see a big correction this month. Instead, September starts were revised down to 630,000 units and October shows only a very small pull-back to 628,000. In October we see more strength in single-family starts, up 3.9 percent. The more volatile multifamily segment was down 13.3 percent. The permits data for October was unambiguously good. Total permits increased by 10.9 percent to hit an annual rate of 653,000 units, the highest rate since housing numbers were juiced up by the home buyers’ tax credit in March of 2010. Today’s residential construction report is not yet a marker of the end of the housing depression, but it is a step in the right direction.
Likewise, labor market data took another step in the right direction. Initial claims for unemployment insurance, for the week ending November 12, decreased by 5,000 to hit 388,000, continuing the recent improving trend. Initial claims have been trending down since mid-September and corroborate improvement in other labor market metrics. In the Job Openings and Labor Turnover Survey (JOLTS) we see an upward trend in the hiring rate and in the household survey of employment we see recent strong gains. Manufacturing conditions in the Philadelphia area improved modestly in early November according to the Federal Reserve Bank of Philadelphia. Employment was a positive in the Philly Fed survey.
Market Reaction: Equity markets opened with losses despite good domestic data. Treasury yields are up at the long end of the yield curve. Oil is down to $100.93/barrel. The dollar is down against the yen and the euro.