Friday, January 18, 2008

Housing Starts Lowest Level Since May 1991.

The contraction in new residential construction activity continued in December. Housing starts tumbled 14.2% last month to an annual rate of 1.01 million units compared to expectations for a more modest decline to a rate of 1.15 million. This was the lowest level of housing starts since May 1991. For all of 2007, 1.344 million housing units were started, 25.8% below the 2006 total and the lowest since 1995 when 1.361 million units were started. Weakness persisted in the single-family sector, with starts falling 2.9% on the month, 36.0% on the year to end at a rate of 794k. Multifamily starts, a highly volatile series, dropped over 40% in December to an annualized pace of 210k. Building permits, often used as an indicator of future building activity decreased 8.1% in December to an annual pace of 1.068 million. The pace of permit issuance suggests builders will continue to slash new starts as they try to work off high inventory levels amid sluggish new home sales. New residential starts are expected to weaken further from here and detract substantially from Q4 and Q1 economic growth.

Jobless claims fell 21k to 301k for the week that ended January 12. The large drop to such a low level is off trend for jobless claims in the past several weeks. Continuing claims for the prior week surged 66k suggests the pace of hiring remains weak and is contrary to the latest jobless claims reading. More weeks of initial claims data will be needed to understand if this week’s drop establishes a new lower trend.
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