With just a few days left before the automatic tax hikes and spending cuts kick in for 2013, the Dow has retreated today on mounting fears that a deal will not be made. Not helping matters is that Senate Majority Leader Harry Reid has just stated that “it looks like [the fiscal cliff] is where we’re headed,” despite the fact that President Obama has cut short his Hawaiian vacation to try to prompt Congress to meet the deadline.
So with that on everyone’s minds, it’s easy to miss the fact that three telling reports on the U.S. economy were released this morning. Let’s take a breather from the Fiscal Cliff to run down the details.
The Jobs Market
Last week, new jobless claims fell 15,000 to 350,000, just around the lowest level since the beginning of the 2007 recession. Analysts had expected jobless claims to remain unchanged at 365,000. Meanwhile, the four-week moving average dropped to 356,750, which is also the lowest level in over four years.
There is a chance that this week’s federal holidays affected the data because several state offices were unable to calculate their jobless claims numbers. However, the fact that the four-week moving average has been steadily moving downward over the past several weeks is a good sign for the U.S. jobs market. This makes me excited for next week’s Unemployment Rate report, due out next Friday.
The Housing Market
In November, new home sales jumped 4.4% to an annual rate of 377,000. While this came in below the 390,000 consensus estimate, new home sales are officially at the highest level since April 2010. Meanwhile, the average price of a new home advanced 3.7% to $246,000 and the supply of new homes for sale dropped from 4.9 months to 4.7 months.
This is great news. Compared with November 2011, both new home sales and the median sales price are up about 15%. So for the first time in seven years, new home building is expected to boost the U.S. economy.
The Conference Board’s index of consumer confidence fell from 71.5 in November to 65.1 in December. This was a larger drop than expected, with economists calling for a reading of 68. Interestingly enough, the index for present conditions climbed to a reading of 62.8, the highest since August 2008. So this month’s drop was caused by the future expectations index, which fell to 66.5 from 80.9 last month.
Considering all of the political posturing and media coverage of the Fiscal Cliff, it’s understandable that consumer confidence may be wavering. However, I expect a debt compromise to come shortly after the New Year, if not before the deadline, and once that happens we should see a rebound in confidence.