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U.S. job growth surges; annual wage gain largest since 2009

A man holds his briefcase while waiting in line during a job fair in Melville, New York July 19, 2012. REUTERS/Shannon Stapleton

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth accelerated in August and wages notched their largest annual increase in more than nine years, strengthening views that the economy was so far weathering the Trump administration’s escalating trade war with China.

The Labor Department’s closely watched employment report published on Friday also showed slack in the jobs market was rapidly diminishing, with a broader measure of unemployment falling to a level not seen since 2001. The report cemented expectations for a third interest rate increase from the Federal Reserve this year when policymakers meet on Sept. 25-26.

“The economy is on an adrenalin rush,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Given the amount of fiscal stimulus that the economy is benefiting from, it’s going to take a lot to get it off that high.”

Nonfarm payrolls surged by 201,000 jobs last month, boosted by hiring at construction sites, wholesalers and professional and business services, the Labor Department said. There were also gains in transportation and healthcare employment.

Job growth averaged 185,000 per month in the past three months. The economy needs to create 120,000 jobs per month to keep up with growth in the working-age population.

Average hourly earnings increased 0.4 percent, or 10 cents in August after rising 0.3 percent in July. That raised the annual increase in wages to 2.9 percent in August, the largest gain since June 2009, from 2.7 percent in July.

A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, fell one-tenth of a percentage point to 7.4 percent, the lowest level since April 2001. The unemployment rate was unchanged at 3.9 percent.

Economists polled by Reuters had forecast nonfarm payrolls increasing by 191,000 jobs last month and the unemployment rate falling to 3.8 percent. The economy created 50,000 fewer jobs in June and July than previously reported.

The dollar firmed against a basket of currencies after the report, while U.S. Treasury yields rose. U.S. stock index futures extended losses.

Analysts say the administration’s $1.5 trillion tax cut package and increased government spending were shielding the economy from the trade tensions, which have also seen Washington engaged in tit-for-tat tariffs with other trade partners, including the European Union, Canada and Mexico.

They also note that the import duties implemented so far have affected only a small portion of the American economy, but warned this could change if President Donald Trump pressed ahead with additional tariffs on Chinese imports.

The United States and China have slapped retaliatory tariffs on a combined $100 billion of products since early July.

LIMITED IMPACT FROM TARIFFS

Americans had until Thursday to comment on a list of $200 billion worth of Chinese goods widely expected to be hit with tariffs soon. The government imposed import duties on goods including steel, aluminum, washing machines, lumber and solar panels early this year to protect American industries from what Trump says is unfair foreign competition.

Global outplacement firm Challenger, Gray & Christmas said on Thursday there were 521 tariff-related job cuts in August, but these were largely offset by the hiring of 359 workers by steel producers.

The employment report added to manufacturing and services industries surveys in suggesting the Trump administration’s protectionist trade policy was having a marginal impact on the economy for now. The economy grew at a 4.2 percent annualized rate in the second quarter, almost double the 2.2 percent pace set in the January-March period.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell two-tenths of a percentage point to 62.7 percent last month, putting a wrinkle on an otherwise upbeat employment report.

Job gains in August were almost across all sectors, though manufacturing payrolls fell by 3,000. That was the first drop since July 2017 and followed an increase of 18,000 in July. Manufacturing employment was weighed down by declines in machinery, computer and electronic products and motor vehicle and parts industries.

Construction companies hired 23,000 more workers last month. They increased payrolls by 18,000 jobs in July. Wholesalers added 22,400 jobs last month. Payrolls in the professional and business services industries rose by 53,000 jobs in August.

Employment at sporting goods, hobby, book and music stores rebounded by 9,200 jobs in August after shedding 30,300 jobs in July related to the closing of all Toys-R-Us stores.

But retail payrolls fell 5,900 last month and government shed 3,000.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. inflation pressures rise in July; Fed on track to lift rates

FILE PHOTO: A woman shops with her daughter at a Walmart Supercenter in Rogers, Arkansas, U.S., June 6, 2013. REUTERS/Rick Wilking/File Phot

By Lindsay Dunsmuir

WASHINGTON (Reuters) – U.S. consumer prices rose in July and the underlying trend continued to strengthen, pointing to a steady increase in inflation pressures that keeps the Federal Reserve on track to gradually raise interest rates.

The Labor Department said on Friday its Consumer Price Index advanced 0.2 percent, the bulk of which was due to a rise in the cost of shelter, driven by higher rents. The CPI rose 0.1 percent in June.

In the 12 months through July, the CPI increased 2.9 percent, matching the increase in June.

Excluding the volatile food and energy components, the CPI rose 0.2 percent, the same gain as in May and June. The annual increase in the so-called core CPI was 2.4 percent, the largest rise since September 2008, from 2.3 percent in June.

Economists polled by Reuters had forecast both the CPI and core CPI rising 0.2 percent in July.

U.S. Treasury yields held near three-week lows and U.S. stocks fell on anxiety about Turkey’s financial woes and its deepening rift with the United States. The U.S. dollar was trading higher against a basket of currencies.

“As the July CPI figures make clear, underlying price pressures are still mounting,” said Michael Pearce, senior U.S. economist at Capital Economics in New York.

The Fed more closely tracks a different inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, which increased 1.9 percent in June.

That gauge hit the U.S. central bank’s 2 percent target in March for the first time in more than six years and Fed policymakers have said they will not be unduly concerned if it overshoots its target in the coming months.

The U.S. central bank has raised rates twice this year, in March and June, and financial markets overwhelmingly expect a hike at the next policy meeting in September.

The Fed currently forecasts a total of four rate rises in 2018, with investors expecting a final nudge upwards of the year in the benchmark overnight lending rate in December.

Inflation pressures are seen continuing to build amid low unemployment and increasing difficulty reported by employers in filling positions. Rising raw material costs are also expected to push up inflation as manufacturers pay more, in part because of tariffs imposed by the Trump administration on lumber, aluminum and steel imports.

Last month, gasoline prices fell 0.6 percent after increasing 0.5 percent in June. Food prices edged up 0.1 percent after rising 0.2 percent in June.

Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, advanced 0.3 percent last month after increasing by the same margin in June. Overall, the so-called shelter index rose 3.5 percent in the 12 months through July.

Healthcare costs fell 0.2 percent after gaining 0.4 percent in June. Prices for new motor vehicles rose 0.3 percent in July following a 0.4 percent increase in the prior month. Apparel prices were down 0.3 percent after a 0.9 percent drop in June.

(Reporting by Lindsay Dunsmuir; Editing by Paul Simao)

Puerto Rico asks Congress for help with delayed disaster relief loan

A woman waits as municipal workers distribute water and ice provided by the U.S. Federal Emergency Management Agency (FEMA), after Hurricane Maria hit the island in September 2017, in Comerio, Puerto Rico January 31, 2018. Picture taken January 31, 2018. REUTERS/Alvin Baez

By Hilary Russ

NEW YORK (Reuters) – The U.S. Treasury has delayed a $4.7 billion post-hurricane loan to Puerto Rico and reduced the amount by more than half, and the resulting financial strain threatens to disrupt essential services, the island’s governor said in a letter asking U.S. congressional leaders to intervene.

Congress approved the community disaster loan in October as part of a larger relief package after hurricanes Harvey, Irma and Maria devastated the island, which was already dealing with the largest government bankruptcy in U.S. history.

But four months later, the U.S. territory still has not received the loan. Last week, the Treasury said it wanted to shrink the amount to $2.065 billion and impose special terms and conditions, according to Governor Ricardo Rossello’s letter, dated Feb. 26.

The Puerto Rico government “may be forced to cut deeply into its liquidity reserves and make the untenable choice of which essential services to cut so that it can maintain other essential services,” Rossello wrote.

The risk of interruption to the island’s electric, water, sewer or other utilities is a direct result of Treasury’s “misguided delay and policy decisions,” he said.

Hurricane Maria, Puerto Rico’s worst natural disaster in nine decades, hit as the island was trudging through an unprecedented economic crisis.

The island declared a form of bankruptcy last May, shouldering some $120 billion in combined bond and pension debt.

Community disaster loans – which are usually forgiven – are just one form of disaster relief. The island’s latest fiscal recovery plan assumes $49.1 billion of federal disaster aid altogether.

The Treasury “intimated that the loans will not be forgiven under any circumstance” and focused more on repayment than on relief for the island’s residents, Rossello’s letter said.

The delayed federal loan has also forced the island’s government “to rely on its own limited liquidity to fund an emergency loan to the Puerto Rico Electric Power Authority,” or PREPA, Rossello’s letter said.

The strained electric utility will need yet another cash infusion in the next 30 to 45 days, he said.

Officials from the Treasury Department and other agencies met on Monday with the Puerto Rico Financial Oversight and Management Board to discuss terms under which the U.S. government will offer community disaster loans to Puerto Rico, Treasury said in a statement.

It said the conditions would include “important steps that will be taken to protect federal taxpayer investments while ensuring funding is available quickly when needed.”

The Treasury Department said Puerto Rico could use the money to make loans to PREPA and other public corporations.

(Reporting by Hilary Russ in New York; Additional reporting by Roberta Rampton in Washington; Editing by James Dalgleish and Lisa Shumaker)

Americans jobless claims rise from 45-year low; labor market tightening

Job seekers listen to a presentation at the Colorado Hospital Association job fair in Denver, Colorado, U.S., October 4, 2017.

WASHINGTON (Reuters) – The number of Americans filing for unemployment benefits rebounded from a 45-year low last week, though by less than expected, pointing to tightening labor market conditions.

Initial claims for state unemployment benefits increased 17,000 to a seasonally adjusted 233,000 for the week ended Jan. 20, the Labor Department said on Thursday. Claims fell to 216,000 in the prior week, the lowest level since January 1973.

Economists polled by Reuters had forecast claims rising to 240,000 in the latest week. Claims have been volatile recently because of the difficulty adjusting the data for seasonal fluctuations at the end of 2017 and the start of the new year. Unseasonably cold temperatures also had an impact on the data.

The Labor Department said claims for Maine were estimated. It also said claims-taking procedures in Puerto Rico and the Virgin Islands had still not returned to normal months after the territories were pummeled by Hurricanes Irma and Maria.

Last week marked the 151st straight week that claims remained below the 300,000 threshold, which is associated with a strong labor market. That is the longest such stretch since 1970, when the labor market was much smaller.

“The song remains the same for tightness of the labor market – employers are extremely reluctant to fire current workers, which reflects not only the current positive business environment but also the difficulty in finding qualified replacements,” said John Ryding, chief economist at RDQ Economics in New York.

The U.S. dollar was largely unchanged against a basket of currencies after the data. Prices of U.S. Treasuries were trading mostly weaker, while U.S. stock index futures were higher.

NEAR FULL EMPLOYMENT

The labor market is near full employment, with the jobless rate at a 17-year low of 4.1 percent. Last week, the four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 3,500 to 240,000.

The claims report also showed the number of people receiving benefits after an initial week of aid dropped 28,000 to 1.94 million in the week ended Jan. 13. The four-week moving average of the so-called continuing claims fell 3,500 to 1.92 million.

The continuing claims data covered the week of the household survey from which January’s unemployment rate will be calculated. The four-week average of continuing claims slipped 1,750 between the December and January survey periods.

That suggests little change in the unemployment rate this month. The jobless rate dropped seven-tenths of a percentage point in 2017, and economists expect it to hit 3.5 percent by the end of this year, which could spur faster wage growth as companies compete for workers.

Strong wage inflation would in turn likely prompt the Federal Reserve to raise interest rates a bit more aggressively than currently anticipated. The U.S. central bank has forecast three rate hikes this year. It increased borrowing costs three times in 2017.

“The Fed may have to pick up its game this year and raise rates four times, not just the three they have already forecast,” said Chris Rupkey, chief economist at MUFG in New York.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)

World stock markets and U.S. dollar retreat before key Trump speech

Men walk past an electronic board showing Japan's Nikkei average outside a brokerage in Tokyo, Japan,

By Sinead Carew

NEW YORK (Reuters) – World stock markets and the U.S. dollar fell on Monday while U.S. Treasury yields rose amid investor caution ahead of a key speech by U.S. President Donald Trump.

The dollar fell ahead of Trump’s State of the Union address, during which he is expected to unveil details on pro-growth policies including infrastructure spending.

“There is setting up for what people expect might be at least a focus on things like fiscal stimulus and infrastructure spending of some kind, that might actually boost risk and cause yields to rise,” said Aaron Kohli, an interest rate strategist at BMO Capital Markets in New York.

U.S. 10-year Treasury notes were last down 7/32 in price to yield 2.342 percent, from a yield of 2.317 percent late Friday. Two-year notes US2YT=RR were last down 1/32 in price to yield 1.169 percent, from a yield of 1.145 percent late Friday.

The dollar was down 0.3 percent against a basket of major currencies after Trump said Monday that tax reform details would not be revealed until after the administration’s proposal on health care.

Investors had hoped for “more clarity around tax reform sooner rather than later” said Bipan Rai, senior macroeconomic strategist at CIBC Capital Markets in Toronto.

At 11:25 a.m. ET, the Dow Jones Industrial Average was down 5.62 points, or 0.03 percent, at 20,816.14, the S&P 500 shed 0.2 points, or 0.01 percent, to 2,367.14, while the Nasdaq Composite added 1.63 points, or 0.03 percent, to 5,846.93.

Europe’s benchmark index of leading 300 shares fell 0.1 percent.

MSCI’s benchmark world stock index slipped 0.03 percent after it hit a record high Thursday.

A proposed 29 billion euro merger between the London Stock Exchange and Deutsche Boerse to create Europe’s biggest stock exchange looked dead in the water due to an inability to meet European antitrust demands. Shares in both companies fell. The London Stock Exchange fell as much as 3 percent while Deutsche Boerse fell as much as 4 percent.

“The regulatory hurdles were always a risk, and with Brexit, there are additional hurdles to clear that seem close to insurmountable now,” said Neil Wilson, senior market analyst at ETX Capital.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.24 percent, while Japan’s Nikkei fell 0.9 percent for its lowest close since Feb. 9 on concerns that a stronger yen would crimp corporate earnings.

The Dow Jones Industrial Average scaled its 11th consecutive record high on Friday, the longest such run since 1987, leading some to suggest it could be prone for a correction.

In Europe, the focus was on France, where the latest polls showed that centrist Emmanuel Macron would score a more convincing victory over far-right and anti-euro Marine Le Pen in the presidential election’s runoff vote.

France’s 10-year bond yield fell to a one-month low of 0.88 percent.

In commodities, Brent crude was up 0.3 percent at $56.14 per barrel while U.S. West Texas Intermediate was up 0.4 percent at $54.20 per barrel as a global supply glut appeared to ease.

(Additional Reporting by Jamie McGeever and Dhara Ranasinghe; Editing by Bernadette Baum)

U.S. housing starts drop; permits rise to one-year high

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. homebuilding fell in January as the construction of multi-family housing projects dropped, but upward revisions to the prior month’s data and a jump in permits to a one-year high suggested the housing recovery remained on track.

Other data on Thursday showed only a modest increase in the number of Americans filing new applications for unemployment benefits last week, a sign that the labor market was continuing to tighten.

Housing starts fell 2.6 percent to a seasonally adjusted annual rate of 1.25 million units last month, the Commerce Department said. December’s starts were revised up to a rate of 1.28 million units from the previously reported 1.23 million pace.

Homebuilding was up 10.5 percent compared to January 2016. Permits for future construction jumped 4.6 percent in January to a rate of 1.29 million units, the highest level since November 2015. Building permits in the South, where most homebuilding occurs, hit their highest level since July 2007.

With overall permits now outpacing starts, homebuilding is likely to rebound in the coming months. Economists polled by Reuters had forecast groundbreaking activity slipping to a rate of 1.22 million units last month and building permits rising to a 1.23 million pace.

Prices of U.S. Treasuries slid and U.S. stock index futures trimmed losses after the data. The dollar <.DXY> pared losses against a basket of currencies.

LABOR MARKET TIGHTENING

The housing recovery is being driven by a strong labor market, which is boosting employment opportunities for young people and supporting household formation.

In a separate report, the Labor Department said initial claims for state unemployment benefits rose 5,000 to a seasonally adjusted 239,000 for the week ended Feb. 11.

Claims have been below 300,000, a threshold associated with a strong job market, for 102 consecutive weeks. That is the longest stretch since 1970, when the labor market was much smaller. The labor market is at or close to full employment, with the unemployment rate at 4.8 percent.

Economists had forecast first-time applications for jobless benefits rising to 245,000 in the latest week. While the labor market is expected to continue to underpin the housing market, higher mortgage rates could slow demand for housing.

A survey on Wednesday showed homebuilders’ confidence slipped in February but remained at levels consistent with a growing housing market. Builders anticipated a slowdown in buyer traffic and continued to grapple with shortages of developed lots and skilled labor.

January’s starts were above the fourth-quarter average, suggesting housing will again contribute to gross domestic product in the first three months of this year.

Homebuilding last month surged 55.4 percent in the Northeast region of the country. It jumped 20.0 percent in the South to the highest level since August 2007. Starts fell 41.3 percent in the West, likely due to the impact of unusually wet weather.

Last month, single-family homebuilding, which accounts for the largest share of the residential housing market, climbed 1.9 percent to a pace of 823,000 units.

Starts for the volatile multi-family housing segment tumbled 10.2 percent to a rate of 423,000 units.

Single-family permits slipped 2.7 percent last month after increasing for five consecutive months. Single-family starts in the South rose to their highest level since August 2007.

Building permits for multi-family units soared 19.8 percent.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. makes limited exceptions to sanctions on Russian spy agency

By Joel Schectman and Dustin Volz

WASHINGTON (Reuters) – The U.S. Treasury Department on Thursday adjusted sanctions on Russian intelligence agency FSB, making limited exceptions to the measures put in place by former President Barack Obama over accusations Moscow tried to influence the 2016 U.S. presidential election with cyber attacks on political organizations.

The department said in a statement it would allow U.S. companies to make limited transactions with FSB that are needed to gain approval to import information technology products into Russia.

At the White House, President Donald Trump responded to a reporter’s question about whether he was easing sanctions on Russia, saying, “I’m not easing anything.”

Sanctions experts and former Obama administration officials stressed the exceptions to the sanctions imposed in December do not signal a broader shift in Russia policy.

In a conference call with reporters, a senior Treasury Department official said the exceptions were “a very technical fix” made in response to “direct complaints” from companies that were unable to import many consumer technology products without a permit from the FSB. The action had been in the making for weeks before Trump took office on Jan. 20, the official said.

Beyond its intelligence function, the FSB also regulates the importation of software and hardware that contains cryptography. Companies need FSB approval even to import broadly available commercial products such as cell phones and printers if they contain encryption.

Peter Harrell, a sanctions expert and former senior U.S. State Department official, said Treasury officials likely had not considered the issue in December.

“I don’t think when they sanctioned FSB they were intending to complicate the sale of cell phones and tablets,” Harrell said.

David Mortlock, a former National Security Council advisor for Obama said that before granting such exceptions, the administration would ask who a sanction was hurting and who it was benefiting.

Mortlock, now an attorney, said “here it’s a pretty easy calculus” because it was clear tech companies were the ones harmed by not being able to import software into Russia, not the spy agencies.

U.S. intelligence agencies accused the FSB of involvement in hacking of Democratic Party organizations during the election to discredit Democrat Hillary Clinton and help Republican Trump.

The agencies and private cyber security experts concluded the FSB first broke into the Democratic National Committee’s computer system in the summer of 2015 and began monitoring email and chat conversations.

They said FSB was one of two Russian spy agencies involved in a broad operation approved by top-ranking people in the Russian government. In December, Obama expelled 35 suspected Russian spies and sanctioned two spy agencies. He also sanctioned four Russian intelligence officers and three companies that he said provided support to the cyber operations.

(Reporting by Joel Schectman and Dustin Volz; additional reporting by Yeganeh Torbati and Jason Lange; Editing by Alistair Bell and Grant McCool)

U.S. Treasury holds debt auctions steady, plans cyber test

By Jason Lange

WASHINGTON (Reuters) – The U.S. Treasury announced on Wednesday it will hold the size of coupon auctions steady in the upcoming quarter when it conducts a small “contingency auction” that an official said would test its ability to borrow following a cyber attack.

It was unclear how much of a role, if any, the White House had in crafting the Treasury’s quarterly debt policy statement, which was the first since President Donald Trump took office last month.

The U.S. Senate has yet to confirm Trump’s Treasury secretary nominee, Steven Mnuchin. Several Treasury officials from the Obama administration have left, with their positions filled on a temporary basis by career bureaucrats or political appointees from the last administration.

The latest policy statement was made by Monique Rollins, Treasury’s acting assistant secretary for financial markets and a holdover from the Obama administration. A Treasury official told reporters separately that the new political leadership was aware of the debt policies announced on Wednesday.

Rollins said in the policy statement that Treasury plans to offer $62 billion in notes and bonds next week, raising approximately $17 billion in new cash.

The contingency test was part of regular auction infrastructure testing, Rollins said.

The Treasury official who briefed reporters separately said the test would gauge the government’s ability to borrow money if a cyber attack disrupted normal auctions.

On future coupon sizes, Rollins said the department “will continue to monitor projected financing needs and make appropriate adjustments as necessary.”

(Reporting by Jason Lange; Editing by Paul Simao)

U.S. blacklists North Korean officials over rights abuses

Kim Jong Un leader of North Korea leading a meeting

WASHINGTON (Reuters) – The U.S. Treasury Department has added seven senior North Korean officials, including leader Kim Jong Un’s sister, to its sanctions list because of human rights abuses and censorship by the communist nation.

The department said in a statement on Wednesday that its Office of Foreign Assets Control added six men and one woman, all officials of the government of the Democratic People’s Republic of Korea or the ruling Workers’ Party of Korea, along with the Ministry of Labor and the State Planning Commission, to the Specially Designated Nationals List.

“The North Korean regime not only engages in severe human rights abuses, but it also implements rigid censorship policies and conceals its inhumane and oppressive behavior,” acting OFAC Director John Smith said in the statement, adding that the move aimed to expose the individuals responsible for the abuses.

The U.S. State Department said in a separate statement that the action coincided with the release of its second report on North Korean human rights abuses and censorship, which it called among the worst in the world.

Pyongyang “continues to commit extrajudicial killings, enforced disappearances, arbitrary arrest and detention, forced labor, and torture. Many of these abuses are committed in the political prison camps, where an estimated 80,000 to 120,000 individuals are detained, including children and family members of those subject to persecution and censorship,” the State Department statement said.

Among seven individuals on the Treasury Department blacklist is Kim Yo Jong, 27, who it said is the younger sister of leader Kim Jong Un, as well as the vice director of the Workers’ Party of Korea Propaganda and Agitation Department.

Also on the list is Minister of State Security Kim Won Hong, whose agency the department said “engages in torture and inhumane treatment of detainees during interrogation and in the country’s network of political prison camps.”

(Reporting by Tim Ahmann; Writing by Eric Walsh; Editing by Tom Brown and Steve Orlofsky)

U.S. housing starts tumble from nine-year high

A carpenter works on a new home at a residential construction site in the west side of the Las Vegas Valley in Las Vegas

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. homebuilding fell more than expected in November, tumbling from a nine-year high as construction activity declined broadly, which could prompt further downward revisions to fourth-quarter economic growth estimates.

Groundbreaking on new housing projects dropped 18.7 percent to a seasonally adjusted annual rate of 1.09 million units, the Commerce Department said on Friday. Last month’s percentage decline was the largest in nearly two years.

Housing starts data is very volatile month-to-month.

There were, however, some silver linings in the report. October’s starts were revised up to a 1.34 million-unit rate, the highest since July 2007. In addition, building permits for single-family homes, the largest segment of the market, rose to a nine-year high in November.

Economists had forecast housing starts slipping to a 1.23 million-unit rate last month from October’s previously reported 1.32 million pace. Coming on the heels of data this week showing weak retail sales and industrial production in November, the plunge in groundbreaking activity could result in fourth-quarter gross domestic product forecasts being trimmed again.

The Atlanta Federal Reserve is forecasting GDP rising at a 2.4 percent annualized rate in the fourth quarter after increasing at a brisk 3.2 percent rate in the third quarter.

U.S. Treasury debt prices rose on the data, while the dollar was little changed against a basket of currencies.

Starts fell in all four regions last month. October’s surge in homebuilding had widened the gap between permits and starts. As such, a drop in housing starts was widely anticipated to bring them more in line with permits.

The housing market remains on solid ground even as mortgage rates have jumped to more than two-year highs following the election of Donald Trump as the next president.

A survey on Thursday showed homebuilders’ confidence in December hitting its highest level since July 2005, with builders anticipating strong sales.

Trump’s surprise victory last month led to a surge in U.S. government bond yields amid investor concerns that the business mogul’s proposed expansionary fiscal policy agenda could fan inflation. Mortgage rates closely track movements in U.S. Treasury yields.

Since the Nov. 8 presidential election, the fixed 30-year mortgage rate has increased about 60 basis points to average 4.16 percent in the week ending Dec. 15, the highest since October 2014, according to data from mortgage finance firm Freddie Mac.

Last month, single-family home building, which accounts for the largest share of the residential housing market, fell 4.1 percent to an 828,000-unit pace. Single-family starts rose to a nine-year high in October.

The housing market is being supported by a tightening labor market, which is starting to drive up wages.

Housing starts for the volatile multi-family segment tumbled 45.1 percent to a 262,000-unit pace.

Permits for future construction fell 4.7 percent in November. Single-family permits rose 0.5 percent last month to their highest level since November 2007. Building permits for multi-family units dropped 13.0 percent.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

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