September 9, 2020
Construction spending was essentially flat, while unemployment and lay-offs fell.
Construction spending saw little motion in July, ticking up slightly to an annual rate of $1.364 trillion, which was 0.1 percent over June’s pace of $1.362 trillion, the Census Bureau and Department of Housing and Urban Development reported last week. Compared to the same period a year ago, July’s spending was 0.1 percent down from July 2019’s page of $1.366 trillion.
Spending on private construction rose to an annual rate of $1.013 trillion, which was 0.6 percent over June’s spending rate of $1.007 trillion. The big driver for the growth in private construction spending was housing. Spending on residential construction saw a solid increase to an annual rate of $546.6 billion in July, which was 2.1 percent over June’s pace of $535.6 billion. Spending on construction of single-family homes hit a rate of $268 billion, which was 3.1 percent over June’s pace of $259.9 billion.
Pairing those spending gains with the positive activity in home sales, housing has been relatively stable despite the economic impact of COVID-19.
“The trend should improve, especially for residential spending, reflecting strong demand for homes as seen in new and existing home sales,” High Frequency Economics chief US. Economist Rubeela Farooqi told the Associated Press.
The economy added 1.4 million jobs in August, which pushed the unemployment rate down to 8.4 percent, the Bureau of Labor Statistics reported last week. Key job growth sectors included retail, professional and business services, leisure and hospitality, education, and health services.
The number of unemployed Americans fell by 2.8 million people to 13.6 million. Comparing those numbers with the employment situation before COVID-19 hit the economy, the unemployment rate is 4.9 percentage points higher than in February, and there are 7.8 percent more people out of work.
Looking at some key subcategories of the unemployed population, the number of Americans who were temporarily laid off fell by 3.1 million in August to 6.2 million, marking a substantial drop from April’s high of 18.1 million people. The number of people who permanently lost their job increased by 534,000 to 3.4 million in August.
Initial Jobless Claims
In related news, initial jobless claims filed by recently unemployed Americans during the week ending Aug. 20 fell to 881,000, a decline of 130,000 claims from the previous week’s 1,011,000 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 991,750, which was 77,500 claims below the preceding week’s average of 1,069,250 claims.
It is important to note that the decline in first-time claims and the four-week moving average is at least partly due to a change in reporting methodology by the Administration.
“There are new seasonal adjustment factors this week which brings down the joblessness slightly,” MUFG chief economist Chris Rupkey told the Reuters news service last week. “The labor market looks just as bad as it was and it will be a miracle if economic growth can continue at such a fast clip during this recovery if it has to drag along millions and millions of workers without paychecks.”
- Tuesday – Consumer credit for July from the Federal Reserve.
- Thursday – Initial Jobless claims for last week from the Employment and Training Administration; wholesale inventories for July from the Census Bureau; producer prices for August from the Bureau of Labor Statistics.
- Friday – Consumer prices for August from the Bureau of Labor Statistics.
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