WASHINGTON - Housing construction rose in August and the number of newly laid-off workers seeking unemployment aid fell unexpectedly last week, adding to signs the recession has ended.
Still, the reports suggested a slow and fragile economic recovery. In part, that's because the increased housing starts were due solely to a surge in construction of apartment buildings — while the much larger single-family homes sector fell for the first time in six months. And jobless claims remain far above the levels associated with a healthy economy.
Even as the housing industry begins to recover from its worst downturn in decades, a glut of unsold homes and record levels of home foreclosures are weighing on the industry.
Construction of multifamily homes and apartments rose 1.5 percent to an annual rate of 598,000 units, the highest level since November, the Commerce Department said Thursday. That was slightly lower than the 600,000-unit pace economists had expected. And it remains more than 70 percent below the peak rate hit in 2006.
The tentative improvements in housing are most likely a rebound "from unsustainably weak results ... reinforced by a temporary boost to demand" from the $8,000 first-time homebuyer tax credit that ends Dec. 1, Joshua Shapiro, chief economist at MFR Inc., wrote in a note to clients.
"Gains from here on will probably be much more difficult to achieve," due to high unemployment, tight credit and a large number of new and existing homes already on the market, he said.
Applications for building permits, a gauge of future activity, rose a 2.7 percent in August to an annual rate of 579,000 units, slightly below the 580,000 level that had been forecast. Permits for single-family homes dipped 0.2 percent but rose for multifamily units by 15.8 percent.
The 1.5 percent rise in housing starts followed a small 0.2 percent dip in July. The August strength reflected a 25.3 percent surge in construction of multifamily units, a volatile sector that had fallen 15.2 percent in July.
The single-family sector dipped 3 percent last month to an annual rate of 479,000 units, the first setback following five straight monthly gains.
Paul Dales, U.S. economist at Capital Economics, noted that housing starts remain 74 percent below their 2006 peak and predicted the housing recovery would be a very "long-winded process."
Meanwhile, initial claims for unemployment benefits dropped last week to a seasonally adjusted 545,000 from an upwardly revised 557,000 the previous week, the Labor Department said Thursday. Wall Street economists expected claims to rise by 5,000, according to Thomson Reuters.
The decline was the third in the past four weeks. The four-week average, which smooths out fluctuations, dropped 8,750 to 563,000. Despite the improvement, that's far above the 325,000 per week that is typical in a healthy economy.
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