Good Jobless, Housing Data, But A Long Way To Go

BloombergHow good, really?

Stocks are enjoying a fairly good day so far, and reports are attributing much of that to positive economic news that came out today. Particularly good are the 12.1% jump in housing starts last month and the largest weekly drop in seasonally-adjusted new jobless claims since February 2010.

In both cases, the figures are multi-year highs, with the seasonally adjusted annual rate of housing starts at 954,000, its highest level since July 2008, and the initial claims of 335,000 the lowest level since January 2008.

That fits with the broader sense of an improving economy, which in turn should feed into a better picture for the stock market — particularly as Standard & Poor’s 500 index companies increasingly need higher revenues to achieve earnings growth.

But as with many things about our stuttering economic recovery, the picture isn’t entirely rosy and certainly suggests we’re well off what one could call a healthy economy.

To start with jobless claims, while the data is heartening, the chart below shows that we’ve had sizable one-week drops in recent months only to see the number rise again in the following week(s).

(Click on the image for a larger version.)

And there’s another reason to not pop the champagne just yet:

While last week’s decline ended four straight weeks of increases, it may not signal a material shift in labor market conditions as claims tend to be very volatile around this time of the year.

This is because of large swings in the model used by the department to iron out seasonal fluctuations.

As for housing, the growth rates are impressive — and likely helping particular stocks such as PulteGroup (PHM), up 6% today — but big picture is depressing, as Sarah Portlock and Alan Zibel at WSJ explain:

Compared with a year ago, new-home construction was up 36.9%. For all of 2012, 780,000 new homes were started, the most since 2008.

Nevertheless, housing starts are still below historical levels. Builders have started construction on an average of 1.5 million new homes a year since 1959.

So even with a big jump, last year’s level was only about half the average seen over the past 50-plus years — and as John Shipman notes, last year’s figure was 23% lower than the worst pre-financial crisis year, 1991, since 1959.