November 11, 2020
Construction spending grew, and employment continued its steady recovery, but unemployment and layoffs remained at very high levels.
Construction spending rose to an annual rate of $1.414 trillion in September, which was 0.3 percent over August’s rate of $1.410 trillion, according to last week’s report from the Census Bureau. Compared to the same period a year ago, September’s construction spending was 1.5 percent higher than September 2019’s pace of $1.393 trillion.
Looking at housing, September’s residential construction grew to an annual rate of $610.9 billion, which was 2.8 percent higher than August’s pace of $594.3 billion. Outlays on the construction of new single-family homes in September expanded to an annual rate of $308.8 billion, which was 5.7 percent higher than August’s rate of $289.3 billion. Spending on construction of new multi-family housing grew to an annual rate of $88.1 billion in September, which was 1.2 percent higher than August’s rate of $289.3 billion.
The increase in spending will hopefully drive increased inventory in order to help keep prices in check.
“A six-month supply of homes is considered a normal supply-and-demand balance, and this figure has been running below a four-month rate since July, putting upward pressure on home prices,” NAHB Chief Economist Robert Dietz noted last week in a public statement. “As builders look to ramp up production, the work-at-home trend is contributing to a suburban shift, meaning that buyers have additional market power to shop for affordable markets.”
The U.S. economy added 638,000 jobs in October, with key job-growth categories including leisure and hospitality, professional and business services, retail trade, and construction, the Bureau of Labor Statistics reported last week.
This lowered the unemployment rate by 1 point to 6.9 percent, with the total unemployed population dropping by 1.5 percent to 11.1 million Americans. Both the unemployment rate and population have fallen for six straight months but remain nearly double 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 1.2 million Americans to 3.6 million in October. This represented 32.5 percent of the total unemployed population.
Economists interviewed in the news last week welcomed October’s jobs performance, which outpaced market expectations for 530,000 new jobs. That said, with COVID-19 diagnoses surging and colder months arriving, economists also expressed worries about how newly recovering industries such as dining would be impacted.
“It’s better than expected, but we’re starting to see headwinds,” Grant Thornton chief economist Diane Swonk told the New York Times. “The drop in the unemployment rate is welcome news, but there are still over 11 million unemployed workers.”
Initial Jobless Claims
In related news, initial jobless claims filed by recently unemployed Americans during the week ending October 31st ticked down to 751,000, a decrease of 7,000 claims from the previous week’s 758,000 claims, the Employment and Training Administration Reported last week.
The four-week moving average, which is considered a more stable measure of jobless claims, dipped to 787,000, which was 4,000 claims below the preceding week’s average of 791,000 claims.
“The initial unemployment number not falling as much as expected is just the tip of the iceberg, as the economy’s ability to add jobs and keep people off assistance is quickly weakening,” Navy Federal Credit Union corporate economist Robert Frick told Barron’s financial news service.
This week, we can expect:
Thursday – Initial jobless claims for last week from the Employment and Training Administration; consumer prices for October from the Bureau of Labor Statistics; Federal budget for October from the Treasury Dept.
Friday – Producer prices for October from the Bureau of Labor Statistics; consumer sentiment for November from the University Of Michigan Surveys Of Consumers.
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