U.S. homebuilding rebounded sharply in December as a firming economy boosts demand for rental housing, while an unexpected drop in the number of Americans filing for unemployment benefits last week pointed to a further tightening in the labor market.
The economy’s brightening prospects were underscored by other data on Thursday showing factory activity in the mid-Atlantic region accelerating to a two-year high this month, amid jumps in new orders, employment and inventories.
In addition, manufacturers reported paying more for raw materials and asking for higher prices for their goods, mirroring other recent factory surveys. This suggests that a broad increase in inflation could be on the way.
The reports came as Republican Donald Trump prepared to be sworn in as president on Friday, taking over from President Barack Obama, whose administration’s policies have been credited with pulling the economy from the 2007-09 recession.
“The economy is doing great, whichever way you look at it,” said Harm Bandholz, chief U.S. economist at UniCredit Research in New York. “The labor market is close to full employment and the housing market continues to heal. Trump is inheriting a strong economy.”
Housing starts jumped 11.3 percent to a seasonally adjusted annual rate of 1.23 million units last month, the Commerce Department said. Starts were driven by a 57.3 percent surge in the construction of multi-family housing units, which offset a 4.0 percent drop in single-family starts.
Economists polled by Reuters had forecast housing starts increasing to a 1.20 million-unit rate in December. Housing starts increased 4.9 percent in 2016.
Permits for future home construction slipped 0.2 percent to a 1.21 million-rate last month as approvals for the multi-family segment fell 9.0 percent. However, permits for single-family homes construction rose 4.7 percent.
The housing market remains on solid ground even as mortgage rates have jumped above 4 percent.
The tightening labor market, marked by an unemployment rate near a nine-year low of 4.7 percent, is fueling demand for housing. Much of the demand, however, has been concentrated in the multi-family housing segment, in part as a shortage of houses on the market drives home prices higher.