The number of Americans filing new claims for unemployment benefits fell last week, pointing to resilience in the labor market despite belt-tightening by Washington.
The improving employment picture is helping to prop up housing, with rising home prices keeping domestic consumption supported, limiting the drag from tighter fiscal policy that is dampening factory activity.
"All the eggs are in housing and the consumers' baskets this quarter. Outside that, there is going to be little support to growth," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
Initial claims for state unemployment benefits dropped 23,000 to a seasonally adjusted 340,000 last week, the Labor Department said on Thursday. Economists had expected claims to fall to 345,000.
The drop unwound most of the prior week's jump and suggested employers were not laying off workers in response to fiscal austerity, especially the $85 billion in across-the-board government spending cuts.
The labor market is being closely watched by the Federal Reserve as debate heats up over the future of its expansive monetary stimulus.
Fed Chairman Ben Bernanke told lawmakers that a decision to scale back the $85 billion in bondsthe U.S. central bank is buying each month could come at one of its "next few meetings" if theeconomy appeared set to maintain momentum.
Economists believe that decision could come as early as the September meeting. Many say any pulling back will be gradual as both employment and inflation will likely remain below the central bank's mandate.
A separate report from the Commerce Department showed new single family home sales rose 2.3 percent last month to a 454,000-unit pace. The median sales price for a new home jumped 14.9 percent from a year ago to a record $271,600.
Jobs, housing data show economy has some muscle | Reuters.