January 12th, 2022
Construction spending continued to rise, while employment grew at a lower-than-expected rate, and layoffs increased.
Construction spending rose to an annual rate of $1.625 trillion in November, which was 0.4 percent above October’s revised rate of $1.618 trillion, according to last week’s report from the Census Bureau. This was lower than the 0.7 percent increase that economists had forecasted for November. When compared to the same period a year ago, November’s spending was 9.3 percent higher than November 2020’s pace of $1.487 trillion.
Spending on private construction in November grew to an annual rate of $1.273 trillion, which was 0.6 percent above October’s revised pace of $1.265 trillion. Spending on housing construction in November expanded to an annual rate of $796.3 billion, which was 0.9 percent higher than October’s revised rate of $789.1 billion.
Looking more closely at residential construction spending, outlays on the construction of new, single-family homes in November rose to an annual rate of $421 billion, which was a solid 1.2 percent above October’s revised rate of $416 billion. Spending on the construction of new multi-family housing ticked down to an annual rate of $99.9 billion in November, which was 0.3 percent below October’s revised rate of $100.3 billion.
While November saw increased spending, the residential construction market is still plagued by supply chain and labor pool issues. As a result, while residential construction outlays were up, inventory continued to shrink, according to Jeff Tucker, senior economist for Zillow.
“Homebuyers angling for a bargain this winter are finding the shelves nearly bare, as inventory has shrunk even faster than in a typical November,” Tucker noted in a research note last week. “Buyers will find some silver linings to this cloudy winter market, like fewer bidding wars and the typical home lingering longer on the market before the seller accepts an offer. But that’s small comfort to buyers after a year in which prices have risen by almost 20 percent.”
The U.S. economy added 199,000 non-farm jobs in December, the Bureau of Labor Statistics reported last week. Job categories that contributed to last month’s employment gains included leisure and hospitality, professional and business services, manufacturing, construction, transportation and warehousing. The jobs report was well below the 422,000 jobs economists had expected for the month.
That said, December’s unemployment rate dropped to 3.9 percent, which was 0.3 down from November, and the unemployed population fell by 483,000 people to 6.3 million.
So, the numbers present an obvious question: if the number of jobs isn’t as high as it should be, yet the employment rate – which is considered an accurate read as it is a home survey – is declining, what’s happening? The simple answer is that employers are having trouble adding workers.
“The unemployment rate is a reliable barometer, and it’s going down fast,” Julia Coronado, founder of the market research firm MacroPolicy Perspectives, told the New York Times. “It does speak to not having enough labor supply to meet demand – not faltering demand.”
Initial Jobless Claims
In related news, first-time claims for unemployment benefits filed by recently unemployed Americans during the week ending January 1st grew to 207,000, an increase of 7,000 claims over the previous week’s revised total of 200,000, the Employment and Training Administration reported last week.
This was higher than economists’ expectations of a decline in initial jobless claims to 195,000. That said, claims remain in safe territory, given that economists consider anything lower than 300,000 claims a sign of a growing job market.
The four-week moving average, which is considered a more stable measure of jobless claims, rose to 204,500, which was 4,750 claims above the preceding week’s revised average of 199,750 claims.
This week, we can expect:
Monday – Wholesale inventories for November from the Census Bureau.
Wednesday – Consumer prices for December from the Bureau of Labor Statistics; the federal budget for December from the Treasury Department.
Thursday – Initial jobless claims for last week from the Employment and Training Administration; producer prices for December from the Bureau of Labor Statistics.
Friday – Retail sales and business inventories for December from the Census Bureau; import prices for December from the Bureau of Labor Statistics; industrial production and capacity utilization for December from the Federal Reserve; consumer sentiment for January from the University of Michigan Surveys of Consumers.
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