Stock Markets
US weekly jobless claims at 16-month low; homebuilding takes breather
© Reuters. FILE PHOTO: A sign advertising job openings is seen outside of a Starbucks in Manhattan, New York City, New York, U.S., May 26, 2021. REUTERS/Andrew Kelly/File Photo
By Lucia Mutikani
WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits fell last week to the lowest level in nearly 1-1/2 years, suggesting job growth likely remained solid in January.
The unexpected decline in initial claims reported by the Labor Department on Thursday added to strong retail sales growth in December in painting an upbeat picture of the economy, and could make it difficult for the Federal Reserve to start cutting interest rates in March as financial markets anticipate.
“The labor market remains strong and reinforces our view that the Fed is likely to hold rates at current levels until the middle of 2024,” said Eugenio Aleman, chief economist at Raymond James.
Initial claims for state unemployment benefits dropped 16,000 to a seasonally adjusted 187,000 for the week ended Jan. 13, the lowest level since September 2022. Economists polled by Reuters had forecast 207,000 claims for the latest week.
Claims data tend to be volatile at the turn of the year. Some of the volatility relates to fewer layoffs after the holidays than is normal.
While that could have contributed to some of the drop in claims, economists said the data was consistent with a fairly tight labor market. They noted that companies generally remained reluctant to lay off workers following difficulties finding labor during and after the COVID-19 pandemic.
Unadjusted claims decreased 29,543 to 289,228 last week, with filings plunging by 17,176 in New York.
There were also significant declines in Michigan, Pennsylvania, Wisconsin, South Carolina, Georgia and Minnesota, which more than offset notable increases in California, Iowa, Kansas and Texas.
“Seasonal layoffs after the holiday season have been milder than usual, leading to a decline in the published seasonally adjusted level of claims,” said Lou Crandall, chief economist at Wrightson ICAP (LON:). “This is not an example of a seasonal ‘distortion’ because the labor market tightness that is making employers wary of laying workers off temporarily is real.”
Stocks on Wall Street were mixed while the dollar rose against a basket of currencies. U.S. Treasury prices fell.
Financial markets have lowered their bets for a rate cut at the U.S. central bank’s March 19-20 policy meeting to below 60%, according to CME Group’s (NASDAQ:) FedWatch Tool.
Fed Governor Christopher Waller said this week that the economy was “doing well” and giving the U.S. central bank “the flexibility to move carefully and methodically.”
The Fed has hiked its policy rate by 525 basis points to the current 5.25%-5.50% range since March 2022.
JOBLESS ROLLS SHRINK
The claims data covered the period during which the government surveyed employers for the nonfarm payrolls component of January’s employment report.
Claims fell between the December and January survey period, suggesting that strong job growth persisted this month. The economy added 216,000 jobs in December.
Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will offer more clues on the state of the labor market in January.
The so-called continuing claims decreased 26,000 to 1.806 million during the week ending Jan. 6, the lowest since October, the claims report showed.
Homebuilding paused in December after strong gains in the prior three months.
Single-family housing starts, which account for the bulk of homebuilding, fell 8.6% to a seasonally adjusted annual rate of 1.027 million units last month, the Commerce Department’s Census Bureau said in a separate report. Wet weather last month likely contributed to the plunge in homebuilding.
Single-family starts increased 15.8% on a year-on-year basis as a shortage of previously owned houses for sale fuels demand for new construction. Permits for future construction of single-family homes increased 1.7% to a pace of 994,000 units last month, the highest level since May 2022.
That aligns with a recent sharp improvement in homebuilder sentiment and reflects declining mortgage rates.
The perennial inventory shortage has combined with still high mortgage rates to weigh on sales of previously owned homes. But new construction demand is boosting residential investment, which rebounded in the third quarter after nine straight quarterly decreases, supporting the economy.
Starts for housing projects with five units or more increased 7.5% to a rate of 417,000 units in December.
Overall housing starts fell 4.3% to a rate of 1.460 million units in December. Starts declined 9.0% to 1.413 million units in 2023. Multi-family building permits rose 1.4% to a rate of 449,000 units last month. Building permits as a whole increased 1.9% to a rate of 1.495 million units. They dropped 11.7% to 1.470 million units in 2023.
The single-family homebuilding backlog rose 0.7% to 140,000 units last month, while the rate for completions jumped 8.4% to 1.056 million units, the highest level since November 2022. The inventory of single-family housing under construction decreased 1.2% to a rate of 671,000 units.
Housing completions increased 4.5% to 1.453 million units in 2023. According to the National Association of Realtors, the inventory of previously owned homes on the market is just above 1 million units, well below nearly 2 million units before the COVID-19 pandemic. Realtors estimate housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month to bridge the inventory gap.
“More supply is still needed,” said Orphe Divounguy, a senior economist at Zillow (NASDAQ:). “Due to more than a decade of underbuilding, a significant shortage of housing options is fueling America’s housing affordability crisis.”
Stock Markets
Palantir, Anduril join forces with tech groups to bid for Pentagon contracts, FT reports
(Reuters) – Data analytics firm Palantir Technologies (NASDAQ:) and defense tech company Anduril Industries are in talks with about a dozen competitors to form a consortium that will jointly bid for U.S. government work, the Financial Times reported on Sunday.
The consortium, which could announce agreements with other tech groups as early as January, is expected to include SpaceX, OpenAI, autonomous shipbuilder Saronic and artificial intelligence data group Scale AI, the newspaper said, citing several people with knowledge of the matter.
“We are working together to provide a new generation of defence contractors,” a person involved in developing the group told the newspaper.
The consortium will bring together the heft of some of Silicon Valley’s most valuable companies and will leverage their products to provide a more efficient way of supplying the U.S. government with cutting-edge defence and weapons capabilities, the newspaper added.
Palantir, Anduril, OpenAI, Scale AI and Saronic did not immediately respond to a Reuters request for comment. SpaceX could not be immediately reached for a comment.
Reuters reported earlier this month that President-elect Donald Trump’s planned U.S. government efficiency drive involving Elon Musk could lead to more joint projects between big defense contractors and smaller tech firms in areas such as artificial intelligence, drones and uncrewed submarines.
Musk, who was named as a co-leader of a government efficiency initiative in the incoming government, has indicated that Pentagon spending and priorities will be a target of the efficiency push, spreading anxiety at defense heavyweights such as Boeing (NYSE:) , Northrop Grumman (NYSE:) , Lockheed Martin (NYSE:) and General Dynamics (NYSE:) .
Musk and many small defense tech firms have been aligned in criticizing legacy defense programs like Lockheed Martin’s F-35 fighter jet while calling for mass production of cheaper AI-powered drones, missiles and submarines.
Such views have given major defense contractors more incentive to partner with emerging defense technology players in these areas.
Stock Markets
Weakened Iran could pursue nuclear weapon, White House’s Sullivan says
By Simon Lewis (JO:)
(Reuters) -The Biden administration is concerned that a weakened Iran could build a nuclear weapon, White House National Security Adviser Jake Sullivan said on Sunday, adding that he was briefing President-elect Donald Trump’s team on the risk.
Iran has suffered setbacks to its regional influence after Israel’s assaults on its allies, Palestinian Hamas and Lebanon’s Hezbollah, followed by the fall of Iran-aligned Syrian President Bashar al-Assad.
Israeli strikes on Iranian facilities, including missile factories and air defenses, have reduced Tehran’s conventional military capabilities, Sullivan told CNN.
“It’s no wonder there are voices (in Iran) saying, ‘Hey, maybe we need to go for a nuclear weapon right now … Maybe we have to revisit our nuclear doctrine’,” Sullivan said.
Iran says its nuclear program is peaceful, but it has expanded uranium enrichment since Trump, in his 2017-2021 presidential term, pulled out of a deal between Tehran and world powers that put restrictions on Iran’s nuclear activity in exchange for sanctions relief.
Sullivan said that there was a risk that Iran might abandon its promise not to build nuclear weapons.
“It’s a risk we are trying to be vigilant about now. It’s a risk that I’m personally briefing the incoming team on,” Sullivan said, adding that he had also consulted with U.S. ally Israel.
Trump, who takes office on Jan. 20, could return to his hardline Iran policy by stepping up sanctions on Iran’s oil industry.
Sullivan said Trump would have an opportunity to pursue diplomacy with Tehran, given Iran’s “weakened state.”
“Maybe he can come around this time, with the situation Iran finds itself in, and actually deliver a nuclear deal that curbs Iran’s nuclear ambitions for the long term,” he said.
Stock Markets
Ukraine says Russian general deliberately targeted Reuters staff in August missile strike
(Reuters) -Ukraine’s security service has named a Russian general it suspects of ordering a missile strike on a hotel in eastern Ukraine in August and said he acted “with the motive of deliberately killing employees of” Reuters.
The Security Service of Ukraine (SBU) said in a statement on Friday that Colonel General Alexei Kim, a deputy chief of Russia’s General Staff, approved the strike that killed Reuters safety adviser Ryan Evans and wounded two of the agency’s journalists on Aug. 24.
In a statement posted on Telegram messenger the SBU said it was notifying Kim in absentia that he was an official suspect in its investigation into the strike on the Sapphire Hotel in Kramatorsk, a step in Ukrainian criminal proceedings that can later lead to charges.
In a separate, 15-page notice of suspicion, in which the SBU set out findings from its investigation, the agency said that the decision to fire the missile was made “with the motive of deliberately killing employees of the international news agency Reuters who were engaged in journalistic activities in Ukraine”.
The document, which was published on the website of the General Prosecutor’s Office on Friday, said that Kim had received intelligence that Reuters staff were staying in Kramatorsk. It added that Kim would have been “fully aware that the individuals were civilians and not participating in the armed conflict”.
The Russian defence ministry did not respond to a request for comment on the SBU’s findings and has not replied to previous questions about the attack. The Kremlin also did not respond to a request for comment. Kim did not reply to messages sent by Reuters to his mobile telephone seeking comment about the SBU’s statement and whether the strike deliberately targeted Reuters staff.
The SBU did not provide evidence to support its claims, nor say why Russia targeted Reuters. In response to questions from the news agency, the security agency declined to provide further details, saying its criminal investigation was still under way and it was therefore not able to disclose such information.
Reuters has not independently confirmed any of the SBU’s claims.
Reuters said on Friday: “We note the news today from the Ukrainian security services regarding the missile attack on August 24, 2024, on the Sapphire Hotel in Kramatorsk, a civilian target more than 20 km from Russian-occupied territory.”
“The strike had devastating consequences, killing our safety adviser, Ryan Evans, and injuring members of our editorial team. We continue to seek more information about the attack. It is critically important for journalists to be able to report freely and safely,” the statement said.
Reuters declined to comment further on the allegation that its staff were deliberately targeted.
The SBU statement said Kim had been named a suspect under two articles of the Ukrainian criminal code: waging an aggressive war and violating the laws and customs of war.
“It was Kim who signed the directive and gave the combat order to fire on the hotel, where only civilians were staying,” it said.
Evans, a 38-year-old former British soldier who had worked as a safety adviser for Reuters since 2022, was killed instantly in the strike.
The SBU statement gave some details about how the strike had occurred, according to its investigation.
“To carry out the attack, the Russian colonel general involved one of his subordinate missile forces units,” the Ukrainian agency said, adding that the strike was carried out with an Iskander-M ballistic missile.
The SBU did not identify the specific unit.
Ivan Lyubysh-Kirdey, a videographer for the news agency who was in a room across the corridor, was seriously wounded. Kyiv-based text correspondent Dan Peleschuk was also injured.
The remaining three members of the Reuters team escaped with minor cuts and scratches.
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