Last Week’s Economic News in Review
Construction spending inched up, thanks to increased residential construction spending. Employment and wages continued to improve while layoffs fell to lows not seen in decades.
Construction spending for July rose to an annual rate of $1.315 trillion, which was 0.1 percent higher than June’s pace of $1.314 trillion, the Census Bureau reported last week. This was below the 0.5 percent increase that housing market analysts had predicted for the month, but when compared to last year, July’s performance was 5.8 percent better than July 2017’s pace of $1.242 trillion.
Residential construction hit an annual rate of $560.1 billion in July, which was 0.6 percent higher than June. Compared to a year ago, this was 6.7 percent higher than July 2017’s rate of $524.8 billion.
While increased spending should be considered good news for a housing market that is eager to add more inventory, home builders kept their enthusiasm in check.
“The good news is that builders continue to report strong demand for new housing, fueled by steady job and income growth along with rising household formations,” Randy Noel, Chairman of the National Association of Homebuilders, noted in a public statement. “However, they are increasingly focused on growing affordability concerns, stemming from rising construction costs, shortages of skilled labor and a dearth of buildable lots.”
The U.S economy added 201,000 jobs in August, with professional services, healthcare, wholesale trade, transportation, warehousing, and mining helping to contribute to the job gains, according to last week’s report from the Bureau of Labor Statistics.
This kept the unemployment rate unchanged at 3.9 percent, and the total unemployed population nearly the same as July with 6.2 million Americans. The employment participation rate – the percentage of employable Americans with jobs or actively looking for work – ticked down by 0.2 percent to 62.7 percent.
Average hourly earnings rose by 10 cents in August to $27.16. Over the year, average hourly earnings grew by 77 cents, or 2.9 percent. This was the largest annual wage gain since 2009. This could likely mean that interest rates will continue to grow, according to Marvin Loh, senior global market strategist at BNY Mellon
“Even if we were to see a reversal of some of the monthly wage gains, short of a collapse, current levels support the Fed’s symmetric 2 percent inflation target,” Loh told the a. “The market fully expects another hike in September.”
Initial Jobless Claims
Layoffs plummeted with first-time claims for unemployment benefits filed by recently unemployed Americans during the week ending September 1 tumbling to 203,000, a fall of 10,000 claims from the preceding week’s total of 213,000, the Employment and Training Administration reported last week. This marked the lowest level for initial jobless claims since December 6, 1969’s 202,000 claims.
The four-week moving average – regarded as a more reliable measure of initial jobless claims – hit a similar low, falling to 209,500, a decline of 2,750 claims from the prior week’s average of 212,250. This was the lowest point for the average since December 6, 1969’s 204,500, and also marked the 183rd week in which initial claims were below the 300,000-claim level, which economists consider an indicator of a growing job market.
This week, we can expect:
- Monday – Consumer credit for July from the Federal Reserve.
- Tuesday – Wholesale inventories for July from the Census Bureau.
- Wednesday – Producer price index for August from the Bureau of Labor Statistics.
- Thursday – Consumer price index for August from the Bureau of Labor Statistics; initial jobless claims for last week from the Employment and Training Administration; federal budget for August from the Treasury Department.
- Friday – Retail sales for August from the Census Bureau; industrial production and capacity utilization for August from the Federal Reserve.