Last Week’s Economic News in Review
Construction spending saw mixed performance, while the economy added fewer-than-expected jobs. Meanwhile, consumer credit picked up its pace in encouraging ways.
Construction spending ticked up 0.1 percent in August to an annual rate of $1.318 trillion, according to last week’s report from the Census Bureau. Compared to the same period a year ago, this was 6.5 percent higher than the August 2017 rate of $1.237 trillion.
That said, August’s growth was mainly driven by a 2 percent increase in public construction spending. Spending on private construction fell 0.5 percent in August to an annual rate of $1.006 trillion.
Housing spending in August fared even worse: residential construction spending notched down 0.7 percent to a pace of $548.9 billion for the month. Spending on single-family construction dropped 0.7 percent to a rate of $284.9 billion and spending on construction of multi-family housing dove 1.7 percent to $58.5 billion.
So, if there’s a demand for housing inventory, why did spending on housing construction decline? Randy Noel, chairman of the National Association of Home Builders (NAHB) chalked up August’s drop to an increase in materials and labor costs.
“The good news is that builders continue to report strong demand for new housing, fueled by steady job and income growth along with rising household formations,” he said in an NAHB statement. “However, they are increasingly focused on growing affordability concerns, stemming from rising construction costs, shortages of skilled labor and a dearth of buildable lots.”
Outside of those factors, it’s also important to keep in mind last month’s report from the Census Bureau that showed building permits for single-family home construction had fallen 6.1 percent in August. That could point to continued construction spending declines.
The economy added 134,000 jobs in September, the Bureau of Labor Statistics reported last month. Key job-growth sectors included professional and business services, healthcare, transportation and warehousing.
The month’s job growth was well below the 185,000 jobs economists had expected for the month. However, that was likely due to the impact of Hurricane Florence.
“We have seen this time and time again after big hurricanes (last September being a very good example after Hurricane Harvey, when payrolls fell 33,000 in the initial print),” Jefferies LLC Senior Money Market Economist Thomas Simons noted in a public statement.
While payrolls were down, the unemployment rate fell to 3.7 percent in September, which was even lower than the 3.8 percent economists had anticipated. The number of unemployed Americans decline by 270,000 in September to 6 million. Compared to the same period a year ago, September’s unemployment rate has declined by 0.5 percent, and the total unemployed population has fallen by 795,000.
Average hourly earnings for September rose by 8 cents to hit $27.24. Hourly earnings have grown by 2.8 percent, or 73 cents, since September 2017.
Consumer borrowing grew the most it had in three months, expanding 6.2 percent in August to a total of $3.935 trillion for the month, according to last week’s report from the Federal Reserve.
The four-week moving average, which is considered a more stable measure of jobless claims, notched up to 206,250, a slight gain of 250 claims from the preceding week’s average of 206,000 claims.
Non-revolving debt, such as student loans and car loans, grew by a solid 6.4 percent in August to hit a total of $2.893 trillion. However, the big story was with revolving debt, such as credit cards, which grew 5.6 percent for the month to hit a total of $1.041 trillion. The gain in revolving debt was a substantial turnaround for the category, which has seen weak performance for months, and helped push overall consumer borrowing growth for the month.
Moreover, that increase jibes with an increase in consumer confidence and indicates a greater willingness to use credit for consumer purchases. That’s reassuring news given that consumer spending drives roughly 70 percent of U.S. economic activity.
This week, we can expect:
- Wednesday – Producer prices for September from the Bureau of Labor Statistics; wholesale inventories for August from the Census Bureau.
- Thursday – Initial jobless claims for last week from the Employment and Training Administration; consumer prices for September from the Bureau of Labor Statistics.
- Friday – Import prices for September from the Bureau of Labor Statistics; consumer sentiment for October from the University of Michigan Surveys of Consumers.