The number of US workers filing new claims for jobless benefits fell last week, but a surprise drop in sales of existing homes in August hinted at a less vigorous pace of recovery from a severe recession.
A report from the US Labour Department showed new claims for unemployment benefits unexpectedly fell 21,000 to a seasonally adjusted 530,000 last week. Analysts polled by Reuters had expected initial claims to rise to 550,000.
In another report, the National Association of Realtors said sales of existing US homes fell 2.7 per cent to an annual rate of 5.10 million units, disappointing market expectations for a rise to a 5.35 million unit pace.
The report, however, did little to change views the economy is recovering from its worst recession in 70 years.
"Everyone knows the third quarter (economic growth) is going to be very good, the question is how sustainable is this recovery and will the housing market be able to fly on its own once the emergency government aid is removed," said Zach Pandl, an economist at Nomura Securities International in New York.
US stock prices dropped on the homes report, while government bond yields fell as the data strengthened perceptions that the economic recovery could falter once the stimulus from government spending fades.
US home sales have been boosted in recent months by an $8,000 government tax credit for first-time buyers and an improving economic picture as well as the lowest prices and mortgage rates in decades.
The tax credit expires at the end of November and NAR chief economist Lawrence Yun said the industry group was lobbying to have it extended into next year to avoid what he called a double-dip recession for the housing market.
The housing market's collapse was the main force behind the recession, which started in December 2007.
"The housing market is close to reaching a point of self-sustaining recovery. We are pushing for the extension of the tax credit so that we achieve this," Mr Yun told reporters.
The decline in August sales was a minor retreat after a strong rise in July, Mr Yun said, and issues related to appraising home values could have led to delays or cancellations of contracts to buy homes. Pending sales contracts rose in July.
Despite the monthly decline, August's sales pace was the second-highest in 23 months, and sales of previously owned homes rose 3.4 per cent compared to August last year.
The August national median home price of $177,700, down 12.5 per cent from August last year, continued to be pulled down by distressed properties, which accounted for 31 per cent of sales last month.
The inventory of existing homes for sale in August fell 10.8 per cent to 3.62 million units from July, the NAR said. August's sales pace left the supply of previously owned homes on the market at 8.5 months from 9.3 months' worth in July.
Stubbornly high unemployment continues to cast a pall over the strength of the economic recovery, which many economists agree is already under way.
While fewer workers submitted applications for unemployment benefits last week, analysts said initial claims had to fall below 500,000 to signal a recovery in the labour market.
The four-week moving average of new claims - considered a better gauge of labour market trends - dipped to 553,500, the lowest since late January, the Labour Department said.