Last Week’s Economic News in Review-Oct 07 2020
October 7, 2020
Construction spending continued to rise, while consumers’ outlook improved, and the economy recovered jobs.
Construction Spending
Construction spending grew to an annual rate of $1.412 trillion in August, which was 1.4 percent over July’s pace of $1.392 trillion, the Census Bureau reported last week.
August’s spending growth was double July’s gain, and when compared to the same period a year ago, August’s spending was 2.5 percent higher than August 2019’s rate of $1.379 trillion
Spending growth continued to be concentrated in private construction, which hit an annual rate of $1.061 trillion in August, marking a 1.9 percent increase over July’s rate of $1.041 trillion.
“While the outlook for nonresidential and public construction is less certain, the trend in residential should improve further, reflecting strong demand for homes as seen in new and existing home sales,” High Frequency Economics Chief U.S. Economist Rubeela Farooqi told the Associated Press.
Consumer Outlook
Consumer confidence improved in September, according to key surveys that were released last week.
The Index of Consumer Sentiment rose to 80.4 for the month, which was 8.5 percent higher than August’s score of 74.1, the University of Michigan (UMI) Surveys of Consumers reported. Meanwhile, the Consumer Confidence Index rose to 101.8 in September after falling to 86.2 in August, according to the Conference Board (a baseline of 100 was set in 1985).
According to both organizations, consumers are responding to improvements in the economy. For example, UMI’s Index of Consumer Expectations grew from 68.5 in August to reach 75.6 in September, and The Conference Board’s Expectations Index rose from 86.6 in August to 104 in September.
“Consumer Confidence increased sharply in September, after back-to-back monthly declines, but remains below pre-pandemic levels,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “A more favorable view of current business and labor market conditions, coupled with renewed optimism about the short-term outlook, helped spur this month’s rebound in confidence. Consumers also expressed greater optimism about their short-term financial prospects, which may help keep spending from slowing further in the months ahead.”
“The recent gains are encouraging even though they were largely due to the upper-income households,” noted Surveys of Consumers Chief Economist Richard Curtin. “Indeed, the data indicates that lower-income households face continued income and job losses compared with the modest gains expected by upper-income households. Without a renewed federal stimulus and enhanced unemployment payments, the income gap will widen.”
Employment Situation
The U.S. economy recovered 661,000 jobs in September, with key job-growth sectors including leisure and hospitality, retail trade, healthcare and social assistance, and professional and business services, according to last week’s report from the Bureau of Labor Statistics.
This helped the unemployment rate drop by 0.5 percentage points to 7.9 percent, with the unemployed population dropping to 12.6 million Americans. We’ve seen unemployment decline for five straight months since the March COVID-19 public health emergency began, but unemployment continued to be much higher than February’s 4.4 unemployment rate and unemployment population of 6.8 million people.
An increasing worry from economists is that the population of long-term unemployed Americans – those without jobs for 27 weeks or longer – is growing. In September, that group’s ranks swelled by 781,000 people to reach 2.4 million.
“The risk is that you end up with people permanently detached from the labor market, and either you never get them back in or it takes you 10 years to get them back in, like it did the last time,” Ian Shepardson, chief economist of Pantheon Macroeconomics, told the New York Times. “The economic consequences are that you depress future growth.”
This week, we can expect:
Tuesday – The balance of trade for August from the Bureau of Economic Analysis.
Wednesday – Consumer credit for August from the Federal Reserve.
Thursday – Initial jobless claims for last week from the Employment and Training Administration.
Friday – Wholesale inventories for August from the Census Bureau.
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