Last Week’s Economic News in Review
New home sales tumbled, while incomes and spending both increased. Also, layoffs saw a sizable jump.
New Home Sales
New home sales fell to a near three-year low in October, with transactions of single-family homes dropping to an annual rate of 544,000, the Census Bureau and the Department of Housing and Urban Development jointly reported last week. This was 8.9 percent below September’s rate of 597,000 and marked the lowest sales rate since March 2016. Compared to the same period a year ago, October’s sales were 12 percent below October 2017’s pace of 618,000.
Looking at price and supply, the median price for new homes sold in October was $309,700, and the average price was $395,000. The inventory of new homes for sale at the end of October was 336,000, which represented a 7.4-month supply at October’s sales rate.
So, with a slow-down in the pace of sales, are we seeing a market correction? Many housing market watchers had already drawn that conclusion prior to the October sales report, but Steve Blitz, chief U.S. economist for TS Lombard, told MarketWatch that there is still pent-up demand.
“If the economy manages to right itself with real wage growth expanding and housing affordability holding relatively steady (prices and mortgage rates), there is a sufficient backlog of demand to reboot housing for this cycle,” he said.
Incomes and Spending
Bearing that in mind, incomes are coming up. Personal incomes increased $84.9 billion, a 0.5-percent gain in October, according to last week’s report from the Bureau of Economic Analysis. Disposable personal income (DPI; income after taxes) increased $81.7 billion, a 0.5-percent increase.
At the same time, personal consumption expenditures (PCE) increased $86.9 billion, a 0.6-percent advance. October’s PCE gains reflected an increase of $14.3 billion in spending for goods and a $41.4 billion increase in spending for services. Spending on prescription drugs led goods spending growth, while household electricity and gas increases led services spending gains.
Initial Jobless Claims
Layoffs increased far more than expected with first-time claims for unemployment benefits filed by recently unemployed Americans during the week ending November 24 shooting up to 234,000, a gain of 10,000 claims from the preceding week’s total of 224,000, the Employment and Training Administration reported last week. Economists had anticipated claims would drop to 220,000.
The four-week moving average – regarded as a more reliable measure of initial jobless claims – grew to 223,250, a gain of 4,750 claims from the prior week’s average of 218,500. Still, this marked the 195th week in which initial claims were below the 300,000-claim level, which economists consider an indicator of a growing job market.
This week, we can expect:
- Monday – Construction spending for October from the Census Bureau and Department of Housing and Urban Development.
- Tuesday – Car and truck sales for November from the auto manufacturers.
- Thursday – Initial jobless claims for last week from the Employment and Training Administration; factory orders and balance of foreign trade for October from the Census Bureau.
- Friday – Payrolls, unemployment and hourly earnings for November from the Bureau of Labor Statistics; wholesale inventories for October from the Census Bureau; consumer credit for October from the Federal Reserve; and consumer sentiment for November from the University of Michigan Surveys of Consumers.