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Initial Claims Down to 900K, Housing & Philly Fed Up

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Thursday, January 21, 2021

This light week for economic data catches up somewhat this Thursday morning, with a full plate of new prints hitting the tape ahead of the regular-market open. The good news is that all of these fresh reads are improvements over what analysts had been expecting. And market indexes continue to move up in the pre-market, extending all-time highs from Wednesday’s close.

Initial Jobless Claims, as almost every Thursday, came out an hour prior to the opening bell, with a headline of 900K new claims an improvement on the 925K expected as well as the downwardly revised 926K from the previous week. This is still the highest level we’ve seen since the summer, and obviously 9/10 of a million new jobless claims in a week, which brings to no one’s mind a robust labor market.

Continuing Claims continue to level off around five million, with 5.05 million posted for two weeks ago (Continuing Claims posts data from one week in arrears from new claims), from a downwardly revised 5.15 million the previous week. We applaud these figures moving in the right direction, though we’re now plateauing at unacceptably high levels. Analysts expect Covid-19 vaccines to play a big role in returning our Services economy back to where we were pre-pandemic, but the timing for such a comeback remains uncertain.

Manufacturing, on the other hand, looks to be rolling along nicely. The Philly Fed survey for January performed much better than predicted: 26.5 from a 10.5 estimate and a downwardly revised 9.1 from December. This is the eighth straight positive manufacturing number for the sixth-largest city in the U.S., and above the average 22.25 posted over that time period. While the Service economy still accounts for a majority of the American workforce, Manufacturers have been more than holding their own for the majority of the past year.

Housing Starts also posted number far beyond expectations. For December, new starts came in at an annualized rate of 1.669 million, well ahead of the 1.56 million analysts were looking for — +5.8% versus +0.8% predicted. It also represents a large step forward from the upwardly revised 1.578 million from November. Building Permits — a proxy for future starts — reached 1.71 million from the 1.61 million estimate last month, +4.5%, and up notably from the 1.635 million reported the previous month.

Within these healthy housing numbers, Single-Family was very strong. This is music to housing analysts’ ears, as single-family is where the biggest need for new housing is, with a record-low supply of existing homes for sale. This amounts to a 12% spike month over month, +27.8% year over year. Even citing higher labor and lumber costs, the new housing industry looks to be firing on all cylinders.

Multi-family housing, on the other hand, has been decelerating: -15% month over month, -40% year over year. These numbers create a bit of ballast for the overall homebuilding print, but do not depict anything dire; single-family housing is where the big bang for the buck is. And as long as this engine is humming robustly, we have a strong underpinning to the U.S. economy as a whole.

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