Last week, new unemployment claims surprisingly fell, while February house sales reached a year-high, indicating a solid first quarter economy. Other Thursday reports showed March economic activity unchanged despite rising prices. A indicator of future economic activity climbed for the first time in two years in February. US labor market resiliency leads the world.
On Wednesday, the Federal Reserve held interest rates while raising growth forecasts and pledging to cut borrowing costs three times by year's end. The favorable economic statistics make it less likely the U.S. central bank will decrease rates before June, experts said. “Companies are not laying off workers and the labor market remains relatively strong,” said New York FWDBONDS chief economist Christopher Rupkey. Existing-home sales are strengthening. This complicates monetary policy easing."
State unemployment claims declined 2,000 to 210,000 seasonally adjusted for the week ended March 16, the Labor Department reported. Last week, Reuters economists anticipated 215,000 claims.
Claims have ranged from 200,000-213,000 since February. Despite a few high-profile layoffs at the start of the year, employers have been hoarding labor after struggling to recruit workers during and after the COVID-19 pandemic
Fed Chair Jerome Powell says "the extreme imbalances that we saw in the early parts of the pandemic recovery have mostly been resolved." Labor is "in good shape," with no "cracks" visible. The Fed has raised its target interest rate by 525 basis points to 5.25%-5.50% since March 2022. The March government employment report nonfarm payrolls survey of firms provides the claims data. Between February and March, claims rose. The economy added 275,000 jobs in February.
Next week, the number of people receiving benefits after a week of aid, a proxy for hiring, will disclose March labor market health. On Thursday, continuing claims rose 4,000 to 1.807 million in the week ending March 9. "The labor market is gradually rebalancing, but the adjustment appears to be coming from less hiring rather than more firings," said High Frequency Economics head U.S. economist Rubeela Farooqi.
That share is well below the 40% economists and realtors say a robust house market needs. A fifth of homes sold last month were overvalued. Many homeowners are discouraged from selling due to mortgage rates below 4%, limiting supply and raising prices. The average existing home price jumped 5.7% to $384,500 in February. Home prices grew in all four regions and may climb as supply lags demand.
More sales equal more brokers' commissions, which boosts GDP residential investment. Q1 Goldman Sachs earnings rose GDP expected to rise 1.9% from 1.7%. Fourth-quarter GDP climbed 3.2%. The fourth Conference Board report revealed the economy's improving prognosis for this year as its primary economic index increased 0.1% in February after declining 0.4% in January. This was the first increase since February 2022.
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