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U.S. home sales trend higher, jobless claims rise

New U.S. claims for jobless benefits jumped unexpectedly last week, but existing home sales in August rose from a 13-year low, suggesting the American economy was stabilizing after a sharp summer slowdown.

A third report Thursday showed a gauge of future economic activity increased 0.3 percent in August after a 0.1 percent gain in July, indicating a slow, but steady growth pace.

"The bottom line is the case for a double dip is weaker. The economy continues to expand, it has lost momentum, but it is likely to continue to expand over the coming months," said Hugh Johnson, chief investment officer at Hugh Johnson Advisors in Albany, New York.

Initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 465,000, the Labour Department said, breaking two straight weeks of declines. Financial markets had forecast claims steady at 450,000.

Separately, sales of previously owned homes increased 7.6 percent to an annual rate of 4.13 million units, a touch above market expectations.

Sales had plummeted 27 percent in July to the lowest level since 1997 after a tax credit for home-buyers expired. While sales rose last month, the pace was still the second lowest in 13 years.

Last week's claims data covered the survey period for the U.S. government's closely watched employment report for September, scheduled for release Oct. 8.

A Labour Department official said only one state had been estimated for last week's claims report and noted that applications for jobless benefits tend to rise in the week following a holiday.

The four-week average of new jobless claims, considered a better measure of underlying labour market trends, fell 3,250 to 463,250, the lowest since July 31.

The labour market has been showing modest signs of improvement after a setback in the second quarter as economic growth slowed sharply.

Relentlessly high unemployment is crimping consumer spending and the Federal Reserve on Tuesday signaled it would, if needed, inject more money into the economy to shore up the recovery and avert a damaging downward spiral in prices.

The central bank already has cut overnight interest rates to near zero and pumped more than $1.7 trillion US into the economy with purchases of Treasury and mortgage-related debt.

Stimulating the lethargic economy is a major challenge for President Barack Obama, and a wave of voter anger over a 9.6 percent unemployment rate could cause the Democratic Party to lose control of Congress to Republicans in the Nov. 2 mid-term election.

Despite the bump up in new applications for unemployment benefits last week, claims are holding well below a nine-month high of 504,000 touched in mid-August.

"One of the biggest reason why companies are reluctant to hire is uncertainty, not so much political uncertainty as it is being touted, but because of the lack of faith that revenue and profitability could be sustained going forward," said Guy Lebas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.

The rise in existing home sales in August was the latest sign the housing market was starting to stabilize after steep declines following the end of a popular home-buyer tax credit in April. Analysts say further progress will depend on the labour market. CTV Two CTV News CTV News Channel BNN - Business News Network CP24