(Reuters) – New claims for unemployment benefits rose last week but the underlying trend continued to point to improving labor market conditions as the factory sector in the Midwest held firm in December.
The growth picture was brightened by other data on Thursday showing pending sales of previously owned homes jumped to a 1-1/2 year high in November, adding to signs of a tentative recovery in the housing market.
Initial claims for state unemployment benefits increased 15,000 to a seasonally adjusted 381,000, the Labor Department said. Economists had expected claims to rise to 375,000.
The four-week moving average – a better measure of trends – fell 5,750 to 375,000, the lowest level since June 2008.
Separately, the Institute for Supply Management-Chicago business barometer was little changed at 62.5 this month from 62.6 in November.
Economists had expected the index to fall to 61. A reading above 50 indicates expansion in the regional economy.
“The unemployment claims data continue to signal that the pace of improvement in the labor market may be gaining momentum,” said John Ryding, chief economist at RDQ Economics in New York.
The four-week average for new claims has held below the 400,000 mark usually associated with improving labor market conditions.
Ryding noted that between late February and mid-April when the four-week average held below the 400,000 level for eight straight weeks, private payrolls growth averaged 240,000.
“Therefore, we expect private payroll growth to top 200,000 in December,” he said.
Other data showed the National Association of Realtors’ Pending Home Sales Index, based on contracts signed in November, increased 7.3 percent to 100.1 — the highest level since April 2010. Economists had expected only a 2 percent rise.
Pending sales lead existing home sales by a month or two.
Recent data on home sales and construction have been fairly upbeat, suggesting an improvement in the sector, but prices continue to trend lower.
LABOR MARKET HEALING
U.S. stocks rose on the economic data, while prices for government debt fell marginally. The dollar was little changed against a basket of currencies.
While the rise in initial claims last week interrupted three straight weeks of declines, the healing in the jobs market remains intact.
The better tone should feed into consumer spending, which slowed significantly in November, and support economic growth.
Already, firming employment — marked by a drop in the jobless rate to a 2-1/2 year low of 8.6 percent in November — is helping to buoy consumer confidence.
While much of the global economy is slowing and the debt crisis in Europe is expected to push the region into a mild recession next year, activity in the United States has held up relatively well.
Fourth-quarter growth is expected to top a 3 percent annual pace, quickening from the July-September period’s 1.8 percent rate. The economy’s resilience, however, could be tested next year if the euro zone situation worsens.
The claims data showed the number of people still receiving benefits under regular state programs after an initial week of aid rose 34,000 to 3.60 million in the week ended December 17.
Economists had forecast so-called continuing claims rising to 3.56 million from a previously reported 3.55 million.
The number of Americans on emergency unemployment benefits fell 15,022 to 2.93 million in the week ended December 10, the latest week for which data is available.
A total of 7.23 million people were claiming unemployment benefits during that period under all programs, up 79,385 from the prior week.
(Reporting by Lucia Mutikani; Editing by Neil Stempleman)