(In this March 23 story, Labor Department corrects data to show claims at 261,000 instead of 258,000. Also corrects other data in report)

FILE PHOTO - A 'House For Sale' sign is seen outside a single family house in Uniondale, New York, U.S. on May 23, 2016. REUTERS/Shannon Stapleton/File Photo

WASHINGTON (Reuters) - New U.S. single-family home sales jumped to a seven-month high in February, suggesting the housing market recovery was gaining momentum despite higher prices and rising mortgage rates.

Other data on Thursday showed an unexpected increase in the number of Americans filing for unemployment benefits last week. Still, the labor market continues to tighten, which together with the strength in housing, should underpin economic growth.

“New home sales are the secret sauce that helps make the economy grow,” said Chris Rupkey, chief economist at MUFG Union Bank in New York. “This will put some backbone in investment spending and make this economic expansion more sustainable.”

The Commerce Department said new home sales increased 6.1 percent to a seasonally adjusted annual rate of 592,000 units last month, the highest level since July 2016. Sales have now more than recouped the sharp drop suffered in December.

Economists had forecast new home sales, which account for about 9.7 percent of the overall market, rising 0.7 percent to a rate of 565,000 units in February. Sales were up 12.8 percent compared to a year ago, showing the housing market’s resilience despite reduced affordability.

The 30-year fixed mortgage rate is around 4.30 percent. House prices increased 5.7 percent in January from a year ago, according a government report published on Wednesday.

Last month’s new home sales were likely partially buoyed by unseasonably warm weather. Most economists see a limited impact on housing from higher mortgage rates because a tightening labor market is improving job opportunities for young adults.

“Rising mortgage rates don’t appear to have been much of an impediment to increasing housing demand in February as solid job gains, faster wage growth, and stronger household formations offset the drop in affordability,” said David Berson, chief economist at Nationwide in Columbus, Ohio.

Slideshow ( 3 images )

In a separate report, the Labor Department said initial claims for state unemployment benefits increased 15,000 to a seasonally adjusted 261,000 for the week ended March 18.

Claims have now been below 300,000, a threshold associated with a healthy labor market for 80 straight weeks. That is the longest stretch since 1970 when the labor market was smaller. The job market is currently near full employment.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 3,500 to 246,500 last week.

U.S. financial markets were little moved by the data as investors focused on whether the House of Representatives would pass a Republican-sponsored bill to begin dismantling Obamacare, which is seen as the first significant policy test for President Donald Trump.

Stocks on Wall Street were trading higher, with the PHLX housing index .HGX gaining 0.7 percent. U.S. government bond prices fell while the dollar .DXY rose slightly against a basket of currencies.

LABOR MARKET FIRMING

The claims data covered the period during which the government surveyed employers for March’s nonfarm payrolls report. The four-week average of claims fell 1,000 between the February and March survey weeks, suggesting another month of strong job gains.

Job growth has averaged 209,000 per month over the past three months and the unemployment rate is at 4.7 percent, close to the nine-year low of 4.6 percent hit last November. Tightening labor market conditions and rising inflation enabled the Federal Reserve to raise interest rates last week.

“The claims data do not suggest a clear shift in labor market conditions between the reference periods for the February and March reports,” said Daniel Silver, an economist at JPMorgan in New York.

The market for new houses is benefiting from a shortage of properties for sale. A report on Wednesday showed a 3.7 percent drop in sales of existing homes in February.

Last month, new single-family homes sales surged 30.9 percent to their highest level since November 2007 in the Midwest and increased 3.6 percent in the South. They jumped 7.5 percent in the West but slumped 21.4 percent in the Northeast.

The inventory of new homes on the market increased 1.5 percent to 266,000 units last month, still less than half of its peak during the housing boom in 2006.

At February’s sales pace it would take 5.4 months to clear the supply of houses on the market, down from 5.6 months in January. A six-month supply is viewed as a healthy balance between supply and demand.