After 3 Months of Drops, Home Resales Edge Up 1%

This article explores the recent rise in home resales after a percentage decline for 3 straight months. Other data displayed a rise in first-time applications for unemployment benefits along with a slowdown in factory activity this month. Several economists don’t believe this slump was enough to change the picture of an improving economy. “We have an economy that is firing on almost all cylinders, and we expect to see a noticeable pickup in growth in 2014,” said Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh.

Sales of previously owned homes rose 1% in December. The sales activity actually didn't meet the pace that many economists had forecasted. A span of brutal, cold weather last month in the Northeast and Midwest caused sales to fall.

In another report, the Labor Department reported that state unemployment benefits tallied 1,000 claims last week. The claims from last week covered the survey period for January non farm payroll data. Only 74,000 jobs were added to employer’s payrolls in December after 241,000 jobs were created in November. The report also showed 1.35 million long-term unemployed Americans dropped off the rolls after their benefits expired.

Economists expect the benefits expiration to lower unemployment rate down by as much as a half percentage point from 6.7 percent. If the unemployment rate drops because this, it could pose several problems to the Fed. Keep in mind that Fed will not change interest rates until 2015 and until the unemployment rate drops to 6.5 percent. If the people dropping out of the labor force cause this decline, it would resemble a sign weakness, not strength. Federal policy makers are meeting next week to discuss monetary policy and the outlook for the economy.

If the expiration of benefits drives the unemployment rate to drop, what should the Fed do next? What solutions do they impose to the problems they could potential face? 

http://www.nytimes.com/2014/01/24/business/economy/home-resales-reverse-decline.html?ref=economy