By Lucia Mutikani
WASHINGTON (Reuters) - U.S. home resales rose in December after three straight months of declines, showing some resilience in the housing market recovery despite higher mortgage rates.
While other data on Thursday showed a marginal rise in first-time applications for unemployment benefits last week and a slowdown in factory activity this month, the deterioration was not 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 pick-up in growth in 2014," said Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh.
Sales of previously owned homes rose 1 percent last month to an annual rate of 4.87 million units, the National Association of Realtors said.
The sales pace, however, was slower than economists' forecast and some blamed frigid weather. Sales fell in the Northeast and the Midwest, which suffered the brunt of cold weather in December.
"The recent housing market slowdown is being exacerbated by transitory factors such as weather," said Gennadiy Goldberg, an economist at TD Securities in New York. "We generally expect housing market activity to accelerate in subsequent months."
Sales in 2013 were the highest since 2006 and prices increased 11.5 percent, the biggest advance since 2005.
Existing home sales lost steam late in the summer as a run-up in mortgage rates and a shortage of properties sidelined potential buyers. December's rise added to pending and new home sales data in offering signs of a tentative pick-up in activity.
In a separate report, the Labor Department said initial claims for state unemployment benefits ticked up 1,000 to a seasonally adjusted 326,000 last week.
The four-week average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, fell 3,750 to 331,500. That suggested the labor market continued to steadily improve.
ACCELERATION IN JOB GROWTH EYED
Last week's claims report covered the survey period for January nonfarm payrolls data. The four-week average for new claims fell 12,250 between the December and January survey periods, suggesting some acceleration in job growth this month.
Employers added only 74,000 new jobs to their payrolls in December after creating 241,000 positions the prior month. That was at odds with other employment indicators that suggested a brisk pace of hiring in December.
"Although claims data can be notoriously volatile at this time of year, there is nothing in the data to suggest that economic growth has down shifted early in 2014," said John Ryding, chief economist at RDQ Economics in New York.
Separately, financial data firm Markit said its preliminary U.S. Manufacturing Purchasing Managers Index fell to 53.7 early this month from 55.0 in December.
A reading above 50 indicates expansion. Activity was held back by a slowdown in new orders and a contraction in export orders. Some cooling off is expected in manufacturing after strong growth in the fourth quarter.
The jobless claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid rose to a six-month high in the week ended January 11.
But it also showed 1.35 million long-term unemployed Americans dropped off the rolls the week before after their benefits expired.
Economists expect the expiration of these extended benefits to push the unemployment rate, currently at 6.7 percent, down by as much half a percentage point as some former recipients drop out of the labor force or take up low paying jobs that they previously would not have considered.
Should the unemployment rate drop because former recipients of jobless benefits have dropped out of the labor force, that could pose problems for the Federal Reserve, which has put the unemployment rate at the center of monetary policy.
The Fed has said it will hold interest rates near zero at least until the jobless rate drops to 6.5 percent. But if a big part of the decline reflects people dropping out of the labor force, that could be seen as a sign of weakness, not strength.
"The Fed could find its forward guidance message more complicated in the months ahead as the unemployment rate continues to decline more sharply than anticipated," said TD Securities' Goldberg.
Fed policymakers meet next Tuesday and Wednesday to discuss monetary policy and the outlook for the economy.
(Reporting by Lucia Mutikani Additional reporting by Margaret Chadbourn in Washington and Steven C Johnson in New York; Editing by Paul Simao and Stephen Powell)