 | Housing Starts Declined 3.0% in August |
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| Posted Under: Data Watch • Home Starts • Housing |
Implications: Hold off on home building for a moment. Initial claims for unemployment insurance fell 11,000 last week to 264,000, the lowest level in two months and the 28th consecutive week below 300,000. This, paired with a decline in continuing claims to 2.237 million, signals continued improvement in the labor market and provides yet another reason for the Fed to raise interest rates today. Right now, we're expecting payroll gains of about 200,000 in September. Now back to housing. Home building took a breather in August, declining 3% to a 1.126 million annual rate. However, starts are still up 16.6% versus a year ago and we expect that trend to continue through at least the end of next year. Based on population growth and "scrappage," overall housing starts should rise to about 1.5 million units per year, which means a large part of the recovery in home building is still ahead of us. Signaling further gains ahead, permits for future building rose 3.5% in August and single-family permits are now at the highest level since January 2008. The total number of homes under construction (started but not yet finished) increased 1.3% in August and is up 16% versus a year ago. In other recent housing news, the NAHB index, which measures confidence among home builders, increased to 62 in September, the highest reading since October 2005. Readings greater than 50 mean more respondents report good market conditions. The worst news today was that the Philly Fed Index, which measures factory sentiment in that region, declined to -6.0 in September versus +8.3 in August. This is consistent with recent weakness in the Empire State index and may signal some weakness in national manufacturing sentiment. However, these indexes measure short-term sentiment better than actual activity and we expect the manufacturing sector to continue to grow in the year ahead.
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