NEW YORK (Reuters) - Home building projects started in June surprisingly rose 9.1 percent due chiefly to a change in New York City building codes that, if it were ignored, would have seen starts decrease by 4.0 percent, a government report said on Thursday.

New York City enacted a new set of construction codes effective July 1, that largely explained an 11.6 percent increase in building permits and the starts number, the government said.

Excluding multifamily data in the Northeast, the government said, there was a 0.7 percent increase in permits and a 4.0 percent decrease in housing starts in June.

The number of U.S. workers filing new claims for jobless benefits rose by a less-than-expected 18,000 last week to 366,000 on a seasonally adjusted basis, a Labor Department report showed on Thursday.

The four-week average of new jobless claims, a better gauge of underlying labor trends because it irons out week-to-week volatility, fell to 376,500 from 381,000 the week before. It was the second consecutive weekly drop in that measure.

The number of people remaining on benefit rolls after drawing an initial week of aid fell to 3.12 million in the week ended July 5 - the most recent data available - which was less than the 3.20 million that analysts expected.

Still, it was the 12th straight week that these continued claims were above 3 million, a sign the slow U.S. economy has made it harder for workers to find jobs.

COMMENTS:

ROBERT MACINTOSH, CHIEF ECONOMIST, EATON VANCE CORP,

BOSTON:

HOUSING STARTS: “It seems absurd given everything else we know about real estate... Excluding the Northeast, starts would have dropped 4 percent. You take that out, and you’re probably where you thought you’d be, down 4 percent. It’s so absurd, it can’t make sense.

JOBLESS CLAIMS: “We’re talking pretty weak economy here. You need to look at the 4-week moving average, and that’s been hovering around this 380,000 level. Text books will tell you that’s commensurate with very weak, but still positive GDP. Exactly the kind of number that we’ve been getting, less than 1 percent but not negative type of GDP growth.

“Until that number gets above 400,000, I think we’re pretty clearly feel we’re not in a recession. It may feel it for certain people in certain industries, but the country as a whole, we’re not there. This is saying exactly what you’d expect. This number makes a lot of sense to me.

MARK ZANDI, CHIEF ECONOMIST, MOODY’S ECONOMY.COM,

WESTCHESTER, PENNSYLVANIA:

HOUSING STARTS/PERMITS: “This is a short-lived bounce in construction, There are just too much unsold inventories for builders to maintain any uptick in construction for long. There is no chance construction can stay over a million units for very long. If there isn’t less construction. we could see prices fall further. The market will either clear by lower prices or lower construction, most probably both. This thing will fade.”

“The permits rise is due to a very large increase in multifamily. There’s nothing to say that the housing slump is over.”

JOBLESS CLAIMS: “The market is very soft but it’s not unraveling. This suggests the payroll number in July could be a bit better than last month. The decline would be in the 25,000 to 50,000 area.”

JOSEPH BATTIPAGLIA, STIFEL NICOLAUS, YARDLEY,

PENNSYLVANIA:

“There’s not much of a takeaway with the housing numbers. They’re still in a slump. This is a reversal of the last couple of months of very dismal performance. I couple that with the survey of builders that came out yesterday on confidence and their confidence is at a new low. So that really sets the tone for the months ahead as far as home building is concerned.

“Jobless claims rose, that’s a negative for the economy. So when you put this together with the composite picture, we still have a weak U.S. economy, an ongoing slump in housing and that has not changed.

“The next six months looks treacherous as far as a weak economy, housing slump continuing, more write offs coming and then we can start talking about more constructive things in 2009.”

DAVID GILMORE, PARTNER AT FOREIGN EXCHANGE ANALYTICS,

ESSEX, CONNECTICUT:

“The rise is obviously above expectations and it’s lending the dollar some support. The permits are also up, which is encouraging as well. I tend to doubt that the market is going to get too excited by the jump in housing starts and permits in light of the fact that real estate is still under enormous pressure (and) home prices are falling. The last thing we need to see is a jump in inventory of new homes. I think the dollar obviously has some upside today. It’s a continuation of yesterday’s short-cover...The market is obviously short dollars.”

BOB WALTERS, CHIEF ECONOMIST, QUICKEN LOANS, LIVONIA

MICHIGAN:

“The rate of decrease in housing starts has dropped over the last six months. We may be approaching levels that could constitute some kind of a floor.”

JOE FRANCOMANO, DIRECTOR OF FOREIGN EXCHANGE, ERSTE BANK,

NEW YORK:

“We have back-to-back positive news on the U.S. Yesterday, it was Wells Fargo, today it’s the housing starts and jobless claims data and these numbers have boosted the dollar. But the markets are extremely volatile and this data’s impact may be short-lived.”

DAVID COARD, HEAD OF FIXED-INCOME SALES AND TRADING AT THE

WILLIAMS CAPITAL GROUP IN NEW YORK:

“Both reports (housing starts and jobless claims) are certainly better than expected for the economy. That is the principal reason why Treasuries are selling off here. I have to get a little more information on the housing numbers, but right now they are favorable from the standpoint of the economy and Treasuries are under selling pressure as a result.”

“With claims, we have to be careful focusing on just one week’s worth of data.”

GARY THAYER, SENIOR ECONOMIST, WACHOVIA SECURITIES, ST.

LOUIS, MISSOURI:

“Housing starts rose, a potential sign that the housing market is starting to stabilize. The overhang of new homes has been coming down. The bigger overhang has been in the supply of existing homes. There’s less supply of new homes on the market. We probably haven’t seen the end of the housing decline. but this is an encouraging sign of life.

“Jobless claims rose, but not dramatically, after a big decline a week earlier. They still suggest a weak economy, but not dramatic job cuts.”

PIERRE ELLIS, SENIOR ECONOMIST, DECISION ECONOMICS, NEW

YORK:

“The housing starts number is bloated by a building authorization technicality in New York City. New building codes came into effect on July 1 so builders started multi-family structures before then. The important thing is that single-family starts were weaker than expected. So builders continue to feel extreme stress and continue to take drastic steps to cut their inventories which is probably a signal that sales in June were disappointing, too.

“New jobless claims rose, but the level was lower than expected which raises some hope that layoffs continue to be stable and may be drifting down slightly.”

MARKET REACTION: STOCKS: US SP500 index futures slightly higher around 1252; BONDS: US benchmark 10-year note yield higher around 3.97 percent; CURRENCIES: US dollar firmer with euro around $1.5840 and yen around 105.73.