US Jobless Claims Remain at 20-Month High, Existing Home Sales Show Modest Increase in May

The number of individuals applying for state unemployment benefits for the first time has remained stable at a 20-month high, indicating a potential softening of the labor market due to the Federal Reserve’s aggressive credit tightening. On the other hand, the housing market is showing signs of stabilization after being significantly affected by the Fed’s rate hikes. However, the selling prices of existing homes have experienced the largest decline in over a decade, highlighting the uncertain nature of the ongoing recovery.

According to the Bureau of Labor Statistics, there were 264,000 new claims filed for jobless benefits in the week ending June 17, matching the previous week’s level, which is the highest number of initial claims since October 2021. Economists surveyed by Reuters had expected 260,000 new claims. However, the number of people continuing to receive benefits saw a slight decrease, falling to 1.759 million in the week ending June 10. This figure was lower than the economists’ estimate of 1.782 million.

The increase in new claims by approximately 45% since September suggests a healthy job market. However, the discrepancy between new claims and continuing claims has economists questioning which data is a more reliable indicator of the labor market’s status. Some possibilities include rehiring of laid-off workers, elevated new claims due to fraudulent filings, or an upcoming increase in continuing claims.

The uncertainty around the labor market’s state is crucial, as it relates to the Federal Reserve’s anticipated end to the rate-hike cycle. Although Fed Chair Jerome Powell mentioned two more quarter-percentage-point rate hikes by year-end, he also stated that the Fed’s decisions will be dependent on future data.

In the real estate market, which was negatively impacted by rising rates, there are signs of stabilization. Existing home sales increased by 0.2% last month to a seasonally adjusted annual rate of 4.3 million units. Sales rose in the South and West but fell in the Northeast and Midwest. Despite the improvement, the largest year-over-year selling price drop in over a decade suggests that the sector’s recovery will be uneven in the coming months.

Limited housing supply continues to be a hindrance to improvement. With only 1.08 million previously owned homes on the market, the lowest on record for the month of May, it is expected that this scarcity will drive up prices. However, economists anticipate that the recent decline in prices will not persist due to strong demand.

 

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