Nov. 17 (Bloomberg) -- Claims for unemployment benefits dropped to the lowest level in seven months and housing starts exceeded forecasts, signaling improvement in the weakest areas of the U.S. economy.
Applications for jobless benefits decreased 5,000 in the week ended Nov. 12 to 388,000, Labor Department figures showed today in Washington. Starts decreased 0.3 percent to a 628,000 annual rate in October, according to the Commerce Department. The median estimate of economists surveyed by Bloomberg News called for a drop to 610,000. Building permits, a proxy for future construction, jumped 10.9 percent.
Fewer firings may signal that companies are closer to hiring more workers, reducing an unemployment rate stuck around 9 percent or higher for more than two years. At the same time, record-low mortgage rates and cheaper homes are helping to support the industry at the heart of the last recession.
“Housing gauges are starting to see some turn,” said Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York. “Jobless claims are presenting a pretty solid corroboration of the view the economy is shifting into a higher gear. We’re likely facing an acceleration in the pace of hiring over the next few months.”
Stocks tumbled, sending the Standard & Poor’s 500 Index to the lowest level in a month, as concern grew that Europe’s debt crisis will worsen. The S&P 500 Index dropped 1.7 percent to 1,216.13 at the close in New York. The yield on the 10-year Treasury note fell to 1.97 percent from 2 percent late yesterday.
Other reports today showed that manufacturing in the Philadelphia region expanded less than forecast in November and consumers’ views on the outlook for the economy improved.
The Federal Reserve Bank of Philadelphia’s general economic index decreased to 3.6 from 8.7 last month. Economists forecast the gauge would be little changed at 9, according to the median estimate in a Bloomberg survey. Readings greater than zero indicate expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
The Bloomberg Consumer Comfort Index’s monthly expectations gauge climbed to minus 32, the best reading since July, from minus 45 the previous month. The weekly measure of current conditions was minus 50 for the period ended Nov. 13, climbing for a second week after sinking to an almost three-year low.
Today’s figures on housing and the labor market add to evidence the world’s largest economy is gaining strength as the fourth quarter begins. Reports this week showed that industrial production and retail sales rose more than forecast in October.
“With Europe an albatross around our necks, the fact that the economy is firming and performing better than expected is really encouraging,” said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Connecticut.
Economists projected 395,000 unemployment claims, according to the median estimate in a Bloomberg survey. The Labor Department revised the prior week’s figure to 393,000 from an initially reported 390,000. The number of people on unemployment benefit rolls fell to a three-year low.
Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates.
Among companies planning to add workers is See’s Candies Inc., a chocolate maker owned by Berkshire Hathaway Inc. It will hire an additional 5,500 employees to its usual staff of 1,500 to meet increased holiday production, according to Chief Executive Officer Brad Kinstler. Most of the new jobs, which are located primarily in the western U.S., are temporary, Kinstler told Bloomberg Television on Nov. 11.
The Commerce Department revised September housing starts to 630,000 from a previously reported 658,000. The October results compare with last year’s tally of 587,000 starts, the second-fewest on record. Home construction totaled 554,000 units in 2009, the lowest since record-keeping began in 1959.
New construction of single-family houses climbed 3.9 percent to a three-month high 430,000 rate from the prior month. Work on multifamily homes, such as townhouses and apartment buildings, decreased 8.3 percent to an annual rate of 198,000 after surging 35 percent a month earlier.
Recent gains in homebuilding have been led by a jump in construction of multifamily dwellings as foreclosures turned more Americans into renters from buyers.
Three of four regions had an October increase in starts, led by a 17.2 percent surge in the Northeast and a 9.7 percent gain in the Midwest. Starts fell 16.5 percent in the West.
D.R. Horton Inc., the second-largest homebuilder by revenue, reported quarterly earnings that missed analyst estimates. The Fort Worth, Texas-based company has been lowering costs and shifting its focus to move-up buyers as demand remains weak.
“We’re still a bit cautious about the overall environment,” Chief Financial Officer William Wheat said on a conference call with investors on Nov. 11. “It is still a challenging homebuilding environment out there.”
Some Fed policy makers say the economy still needs help.
San Francisco Fed President John Williams this week said more action “may be needed” to reduce “persistently high unemployment,” and Chicago Fed President Charles Evans promoted “increasing amounts of policy accommodation” to reduce unemployment that he said is far above the central bank’s objective.
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