Reuters reported that the number of Americans claiming new jobless benefits hit a three month low last week and contracts to buy existing homes rose in June 2011, hopeful signs for an economy that has struggled to regain momentum.
The Labor Department said that initial claims for state unemployment benefits dropped 24,000 to 398,000, below economists' expectations for a fall to 415,000.
A separate report from the National Association of Realtors showed that pending home sales rose by 2.4% in June, the second straight monthly increase. Contracts usually lead sales by a month or two.
The reports offered some relief after a recent string of weak data, which had shown the economy closing out the first half of the year on a soft note. A deadlock in Washington over raising the nation's debt limit has hurt sentiment.
Mr Michael Strauss, chief economist at Commonfund in Wilton, said that "Claims provide some hints that the economy is going to do better in the third quarter. Assuming we don't get massive government furloughs because we don't get the debt limit raised in the next couple of days or couple of weeks, we would probably see GDP growth in the 3% range in the second half of year as opposed to sub 2% in the first half."
US stocks rose on the data, a day after posting their biggest fall in eight weeks. Prices for US Treasuries also increased despite fears of the government defaulting on its debt, while the dollar fell against a basket of currencies.
The weak economy hurt domestic sales of consumer companies such as Colgate Palmolive Co and Avon Products Inc in the second quarter. However, Colgate CEO Mr Ian Cook said that business in the United States got off to a healthy start in July. While the rise in pending home sales was encouraging, there has been an increase in contract cancellations because of problems with property valuations and tight lending standards, and high cancellations had pushed down home resale in June.
Ms Yelena Shulyatyeva, an economist at BNP Paribas in New York, said that "The pickup in pending home sales might not necessarily end up in a measurable pick up in mortgage closings and translate into a healthy increase in existing home sales."
The weak housing and labor markets are high on the list of factors frustrating the economy's recovery from the 2007-09 recession. The labor market took a beating in May and June, with non farm payrolls increasing only 43,000 over the two months. But the dip in claims below the 400,000 mark offered reason for cautious optimism.
Mr Troy Davig, a senior economist at Barclays Capital in New York, said that "The recent softness in the labor market may be beginning to subside. The full unwinding of the high gasoline prices and supply chain disruptions stemming from the Japanese earthquake, which led to much of the softness in the second quarter, will take time, but appears to be proceeding."
A four week moving average of claims, considered a better measure of labor market trends, fell 8,500 to 413,750, while the number of people still receiving benefits under regular programs after an initial week of aid declined 17,000 to 3.70 million in the week ended July 16th 2011.
Data for the so called continuing claims covered the survey week for the household survey from which the unemployment rate is derived. The jobless rate rose to 9.2% in June 2011 from 9.1% in May 2011.
(Sourced from www.reuters.com)
