December 09, 2020
Construction spending grew due in no small part to homebuilding, while the pace of job growth slowed and layoffs declined.
Construction spending rose to an annual rate of $1.438 trillion in October, which was 1.3 percent over September’s rate of $1.420 trillion, according to last week’s report from the Census Bureau. Compared to the same period a year ago, September’s construction spending was 3.7 percent higher than October 2019’s rate of $1.386 trillion.
Looking at housing, October’s residential construction grew to an annual rate of $637.1 billion, which was 2.9 percent higher than September’s pace of $619.1 billion. Outlays on the construction of new single-family homes in October expanded to an annual rate of $324 billion, which was 5.6 percent higher than September’s rate of $306.9 billion. Spending on construction of new multi-family housing grew to an annual rate of $90.1 billion in October, which was 1.2 percent higher than August’s rate of $89.1 billion.
Meanwhile, nonresidential private construction fell to an annual rate of $456.6 billion in October, which was 0.7 percent down from September’s pace of $459.9 billion. Also, public construction spending ticked up to an annual rate of $344.8 billion in October, which was 1 percent over September’s rate of $341.4 billion.
“Looking ahead, the trend in residential should remain firm, in particular single-family construction, reflecting strong demand for homes as reflected in elevated new and existing home sales,” High Frequency Economics’ Chief U.S. Economist Rubeela Farooqi wrote in a statement. “However, prospects for nonresidential and public construction are dim owing to weak demand, disruptions in the energy sector as well as budget constraints.”
The U.S. economy added 245,000 jobs in November, with key job-growth categories including transportation and warehousing, professional and business services, and healthcare, the Bureau of Labor Statistics reported last week.
This lowered the unemployment rate slightly to 6.7, with the total unemployed population dropping to 10.7 million Americans. Both the unemployment rate and population have fallen for seven straight months but remain well above their respective February levels of 3.5 percent and 5.8 million people.
The population of long-term unemployed people – those who haven’t had jobs for 27 weeks or longer – grew by 385,000 Americans to 3.9 million in October. This represented 36.9 percent of the total unemployed population.
November’s jobs report marked the fifth straight month that the pace of job recovery has slowed.
“We’re in an unusual position right now in the economy,” Ernie Tedeschi, an economist at accounting company Evercore ISI, told the New York Times. Tedeschi explained that the COVID-19 vaccines offer room for optimism, but over the near term, he said, “we’re going to have a few of the toughest months of this pandemic, and there will be a lot of scars left to heal.”
Initial Jobless Claims
In related news, initial jobless claims filed by recently unemployed Americans during the week ending November 28th dropped to 712,000, a decrease of 75,000 claims from the previous week’s 787,000 claims, the Employment and Training Administration reported last week.
The four-week moving average, which is considered a more stable measure of jobless claims, fell to 739,500, which was 11,250 claims below the preceding week’s average of 750,750 claims.
The decline in layoffs was welcome news, but weekly claims are still at higher levels compared to any week data outside of the pandemic’s timeframe.
“The fact that more than eight months into the crisis, initial claims are still running at such a high level is, in absolute terms, bad news,” MFR Consultants Chief U.S. Economist Joshua Shapiro wrote in a public statement. “Moreover, with the pandemic again worsening, it is likely that claims will remain quite elevated for some time to come.”
This week, we can expect:
Monday – Consumer credit for October from the Federal Reserve.
Wednesday – Wholesale inventories for October from the Census Bureau.
Thursday – Initial jobless claims for last week from the Employment and Training Administration; the Federal budget for November from the Treasury Department; consumer prices for November from the Bureau of Labor Statistics.
Friday – Producer prices for November from the Bureau of Labor Statistics; consumer sentiment for December from the University Of Michigan Surveys Of Consumers.
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