The number of Americans filing new claims for unemployment benefits fell to a nine-month low last week, signaling continued strength in the labor market. The unexpected decline in initial jobless claims, combined with solid retail sales and factory production in September, suggests sustained momentum in the US economy. Economists believe that companies are holding on to their workers amid expectations of a tight labor market and difficulties in finding qualified employees. The data supports expectations that the Federal Reserve could maintain higher interest rates for a longer period of time.
Despite the strong labor market, the housing market is struggling. Existing home sales dropped 2.0% in September, reaching the lowest level since October 2010. Surging mortgage rates and tight supply have reduced affordability for first-time buyers, with their share of purchases falling well below what is needed for a robust housing market. With mortgage rates at nearly a 23-year high, home resales are expected to decline further, and there is no relief in sight for the housing market unless mortgage rates drop significantly and inventory surges.
Meanwhile, business conditions in the Mid-Atlantic region remain subdued, according to a report from the Philadelphia Fed. While manufacturers expect improvement over the next six months, there has not been significant activity in the region. The claims report for the week also covered the period during which the government surveyed business establishments for the nonfarm payrolls component of October’s employment report. The economy created 336,000 jobs in September, the highest monthly gain in eight months. The upcoming data on the number of people receiving benefits after an initial week of aid will provide further insights into the health of the labor market in October.
