Last Week’s Economic News in Review

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Construction spending saw its best growth in more than 10 years, taking the market by surprise. Meanwhile, unemployment ticked up slightly, with wages seeing solid gains, and layoffs enjoyed an unexpected tumble.

Construction Spending

Construction spending surged past market expectations in November to hit a 10-and-a-half-year high. Construction spending grew 0.9 percent for the month to hit an annual rate of $1.182 trillion, according to last week’s figures released by the Census Bureau. This was well over the 0.5 percent real estate market watchers had anticipated. Compared to last year, November’s performance was 4.1 percent better than November 2015’s $1.135 trillion pace.

Private construction grew a solid 1 percent in November to hit a rate of $892.8 billion, and the residential construction segment hit an annual rate of $462.9 billion in November, which was 1 percent higher than October’s rate of $458.2 billion. Over the past 12 months, overall residential construction spending has grown 3 percent. Construction spending for single-family homes grew 1.8 percent during November, but had dipped 0.9 percent when compared to November 2015. Construction spending on multi-family units was down 2.7 percent for the month, but compared to last year multi-family spending was up a whopping 10 percent over November 2015.

“These numbers confirm what contractors have been reporting — that there was no let-up in demand last year,” Ken Simonson, chief economist for the Associated General Contractors of America, noted in a public statement. “Most contractors expect to remain busy in 2017, as well, although there will be a shift in the types of projects that are most active. Office construction is especially hot, while manufacturing and apartment construction are slowing sharply, and public investment is a major question mark.”

Unemployment

The U.S. economy added 156,000 non-farm jobs in December, with the unemployment rate ticking up by one-tenth of a percent to 4.7 percent, according to last week’s report from the Bureau of Labor Statistics reported. Key growth sectors for jobs included healthcare and social assistance.

All told, there were 7.5 million unemployed Americans in December, according to the Bureau’s report. The number of people unemployed for 27 weeks or longer hovered at 1.8 million for the month, and comprised 24.2 percent of the unemployed population. The number of Americans employed part time for reasons such as their hours being cut or that was the only work they could find, was essentially unchanged from December at 5.6 million, but was down 459,000 over the past 12 months.

The labor force participation rate — the percentage of employable Americans either holding a job or actively looking for work — was essentially unchanged at 62.7 percent, the rate at which it has more or less been sitting for the past year.

While many employment metrics saw little change in December, an encouraging detail arose from the month’s data: average hourly earnings grew by 10 cents to $26.00. Moreover, average hourly earnings rose 2.9 percent for the year, which has been the biggest yearly increase for the past eight years. This could be a sign that employers are starting to pay more to keep good employees.

“This is a turning point for the overall economy,” Diane Swonk, an independent economist, told the New York Times.

Initial Jobless Claims

First time claims for unemployment benefits filed by the newly unemployed during the week ending December 31 plummeted well past market predictions. Initial jobless claims filed during the week tumbled to 235,000, a decline of 28,000 from the preceding week’s total of 263,000 claims, the Employment and Training Administration reported last week. Market expectations had actually anticipated that initial jobless claims would come in at 265,000 for the week.

The four-week moving average — considered a more stable measure of layoffs — dipped to 256,750 claims, a drop of 5,750 claims from the prior week’s average of 262,500. This marked the 96th straight week of initial claims falling below the 300,000-claim mark, a point that economists consider an indicator of a growing job market. This has been the longest such streak since 1970.

This week, we can expect a light calendar of economic reports, due to the holidays:

  • Monday — Consumer credit for November from the Federal Reserve.
  • Tuesday — Wholesale inventories for November from the Census Bureau.
  • Thursday — Import and export prices for December from the Census Bureau and the Bureau of Economic Analysis; initial jobless claims for last week from the Employment and Training Administration; the Treasury Department’s budget for December.
  • Friday — The producer price index for December from the Bureau of Labor Statistics; retail sales for December and business inventories for November from the Census Bureau.
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