US Jobless Claims Fall, While Higher Mortgage Rates Weigh on Housing

The number of Americans filing new claims for unemployment benefits declined unexpectedly last week, suggesting continued stability in the US labor market. Initial state unemployment claims fell by 10,000 to a seasonally adjusted 196,000 for the week ending September 12, according to the Labor Department. Economists surveyed by Reuters had expected claims to reach 208,000.

The decline, however, may have been influenced by the Labor Day holiday, which can make seasonal adjustments more difficult. The four-week moving average, which provides a smoother view of labor market conditions, also decreased by 2,750 to 203,250.

The claims data covered the period when the government surveyed employers for the September employment report. The four-week average remained broadly similar between the August and September survey periods, pointing to relatively steady labor market conditions.

The number of people continuing to receive unemployment benefits after their first week of assistance also declined. Continuing claims fell by 39,000 to a seasonally adjusted 1.730 million for the week ending September 5, reaching their lowest level since January 2024. Economists also noted that seasonal adjustment factors may have affected this measure.

US payroll employment rose by 162,000 jobs in August after much slower growth during the previous three months. The unemployment rate stood at 4.1% in August. Low layoffs and a smaller labor force have helped keep the unemployment rate relatively contained, while businesses remain cautious about increasing hiring amid economic pressures.

Housing Sector Faces Higher Borrowing Costs

Higher inflation has pushed mortgage rates upward, adding pressure to the US housing market. Data from the Commerce Department's Census Bureau showed that permits for future single-family home construction fell 1.8% in August to a seasonally adjusted annual rate of 878,000 units. Permits were still 1.3% higher than a year earlier.

The decline in permits followed a drop in single-family homebuilder sentiment to a one-year low in September. The National Association of Home Builders attributed the weaker sentiment to higher mortgage rates, labor shortages linked to an immigration crackdown, and increased material costs associated with import tariffs.

The average rate for a 30-year fixed mortgage reached 6.95% in the latest week, its highest level since January 2025. The rate has increased by nearly 100 basis points since the Middle East war began.

Despite the decline in permits, single-family housing starts increased 7.6% in August to an annualized rate of 918,000 units. Single-family housing starts were also 5.2% higher than a year earlier.

Overall housing starts declined 2.6% in August to an annualized pace of 1.275 million units and were down 1.2% from a year earlier. Multi-family housing starts fell 22.5% to an annualized rate of 344,000 units. Residential investment has contracted in five of the past six quarters.

A separate report from the National Association of Realtors showed that contracts to purchase previously owned homes increased 0.3% in August. However, such contracts were down 4.7% compared with the same month a year earlier.