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DATA SALAD: HOUSING STARTS/BUILDING PERMITS, JOBLESS CLAIMS, FLASH PMI, PHILLY FED

Friday economic indicators appeared to reflect an economy that's quite ready to close the book on the uncertainties of the day and get back to the business of growth and expansion.

Starting with the housing market, groundbreaking on new American homes USHST=ECI dropped by 2.8% in April to 1.465 million units at a seasonally adjusted, annualized rate (SAAR), according to the Commerce Department.

Still, that's 3.9% stronger than the 1.410 million units SAAR analysts were expecting, owing to March's upwardly revised 12.0% jump.

Excavating below the headline, single-family projects - which account for the lion's share of the total - tumbled 9.0%, while the starts in the volatile multiple-unit segment helped mitigate that drop by jumping 10.3%.

"The pick-up in housing starts this spring looks partly due to unusually warm weather enabling more projects to commence than usual," says Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. "The homebuilding sector continues to face pressure from prior over-construction, the renewed rise in mortgage rates, and the slowdown in population growth."

"Homebuilders currently hold excess inventory of unsold new single-family homes, and the vacancy rate in the private rented market is high and rising," Tombs adds.

On the other hand, building permits USBPE=ECI - considered one of the housing market's more forward-looking indicators - increased by 5.8% to 1.442 million units SAAR, or 4.1% stronger than economists predicted.

Here again, the multiple-unit segment provided the upside muscle, surging 21.8%, while permits for single-family projects dipped by 2.6%.

Turning to the labor market, last week, 209,000 U.S. workers joined the line outside the unemployment office USJOB=ECI, which was 3,000 fewer than the previous week and 1,000 shy of analyst expectations.

Ironing out weekly volatility, the four-week moving average of initial claims continues to drift sideways, with a slight downward bias.

In the wake of April's stronger-than-expected employment report, the claims data could ease fears of a softening labor market. Recent JOLTS data showed a drop in job openings, an indication of weakening labor demand. But it also showed a marked uptick in hiring and firing, hinting that employers could be rousing themselves out of the low hire/low fire mode in which they'd been idling since the onset of the Iran war and other geopolitical uncertainties.

Ongoing jobless claims USJOBN=ECI, which are reported on a one-week lag, inched 0.3% higher to 1.782 million, just shy of consensus.

"Perhaps the most notable thing about claims data right is how unremarkable they are," says Matthew Martin, senior U.S. economist at Oxford Economics. "Initial claims have remained in a narrow band for roughly three months and have recently trended below their prior year levels, a surprising stretch of stability given the headwinds from the Iran conflict, elevated inflation, and lingering tariff uncertainty."

"The labor market isn’t booming, but employers remain reluctant to reduce headcount."

Next, U.S. business activity has continued to expand at a modest pace in June.

S&P Global's advance "Flash" March purchasing managers' indexes (PMI) showed the manufacturing side USMPMP=ECI rising 0.8 points to 55.3, and the larger services sector USMPSP=ECI losing a teensy bit momentum, easing 0.1 points to 50.9.

In aggregate, the composite measure USPMCF=ECI held firm at 51.7.

All three metrics remain north of 50, the PMI dividing line between contraction and expansion.

For the time being, factory growth is supported by stock building as the Middle East turmoil showed no signs of abating. On the other hand, input costs - an inflation predictor - hovered near multi-year highs and were cited by survey participants as causing lower sales, contributing to steepening job losses and contributing to the hottest selling price inflation since August 2022.

“The damaging economic impact from the war in the Middle East is becoming increasingly evident in the business surveys," writes Chris Williamson, chief business economist at S&P Global. "The ‘flash’ PMI data for May recorded only modest growth of business activity as demand was again squeezed by a further spike in prices and jobs were cut as firms worried over rising costs and the economic outlook."

Finally, the Philly Fed business index USPFDB=ECI unexpectedly plunged into contraction this month, dropping 27.1 points to print at -0.4. Analysts expected an 8.7-point deceleration.

"Responses to the May Manufacturing Business Outlook Survey suggest an overall weakening in the region’s manufacturing activity," says the Philadelphia Fed's press release. "The indicators for current activity, new orders, and shipments all fell sharply this month."

"The firms continued to report an overall decline in employment, on balance," the Philly Fed says. "Price increases were less widespread this month, but both price indexes remained elevated."

This report stands in sharp contrast to Friday's Empire State index, which showed New York State factories have shifted into overdrive in May.

Positive Philly Fed/Empire State numbers indicate monthly growth, while negative readings signify contraction.

(Stephen Culp)

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