News & Events

Archive for January, 2017
 
Economic Advisor: January 25, 2017
January 25, 2017


 

Starts on new home construction shot up, while layoffs tumbled, and consumer prices increased.

Housing Starts

Housing shot up, ending what has been the best year for construction starts since the housing boom year of 2007. Construction starts on housing in December rocketed to an annual rate of 1.226 million, which was 11.3 percent over November’s rate of 1.102 million, and was 5.7 percent higher than December 2015’s rate of 1.160 million, according to last week’s data released by the Census Bureau.

However, it’s important to note that the main growth area for housing was multi-family units. Starts on single-family homes dipped to an annual rate of 795,000 in December, which was 4 percent below November’s rate of 828,000. Meanwhile, starts on buildings with five or more housing units hit a rate of 417,000, which was a whopping 53.9 percent higher than November’s rate of 271,000.

The overall thrust from analysts is that the momentum was welcome, but in an inventory-starved housing market, more is needed.

“Despite the modest bump, starts in new housing construction was at its highest since 2007,” Trulia Chief Economist Ralph McLaughlin noted in a public statement. “… When controlling for the number of households in the U.S., housing starts are still only 62 percent of its 50-year average, but this is up from 55 percent last month.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending January 14 tumbled to 234,000, a drop of 15,000 claims from the preceding week’s total of 249,000, the Employment and Training Administration reported last week.

The four-week moving average — considered a more stable gauge of lay-off activity — also saw a considerable drop to 246,750 claims, a fall of 10,250 claims from the prior week’s average 257,000.

This is the lowest mark for the average since November 3, 1973’s average of 244,000. This marks the 98th straight week of initial jobless claims falling below 300,000, a mark that economists consider indicative of a growing job market.

“We believe the trend in employment growth remains quite strong — more than strong enough to keep the unemployment rate trending down,” High Frequency Economics Economist Jim O’Sullivan stated in a client note.

Consumer Prices

In line with market expectations, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent during December, the Bureau of Labor Statistics reported last week. Over the past 12 months, the CPI-U increased 2.1 percent. The main drivers for December’s gain were the shelter and gasoline indexes, which rose 0.3 percent and 3 percent, respectively, during the month.

The index for all items minus food and energy — otherwise known as core inflation, because it negates the two items most subject to large, monetary swings — increased 0.2 percent in December, which was the same percentage gain in November. In addition to the shelter index, other key contributors to core inflation increases were prices for motor vehicle insurance, medical care, education, airline fares, used cars and trucks, and new vehicles.

This week, we can expect:

  • Tuesday — Existing home sales for December from the National Association of Realtors.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for December from The Conference Board; new home sales for December from the Census Bureau.
  • Friday — Advanced fourth quarter GDP from the Bureau of Economic Analysis; durable goods orders for December from the Census Bureau; and January consumer sentiment from the University of Michigan Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: January 18, 2017
January 18, 2017


 

Consumer credit exceeded market expectations, and retail sales saw solid growth, but initial jobless claims also increased.

Consumer Credit

Consumer credit for November grew well beyond what credit market watchers had anticipated. Borrowing for the month expanded 7.9 percent or $24.6 billion, as opposed to the $18 billion the market expected, according to figures released last week by the Federal Reserve.

Total consumer borrowing expanded to $3.75 trillion for November from October’s $3.72 trillion. Non-revolving debt, such as student and car loans, represented the lion’s share of the increase, growing 5.9 percent to $2.75 trillion. That said, revolving debt, which is predominantly comprised of credit card debt, shot up a whopping 13.5 percent to $992.4 billion in November.

Consumer borrowing, especially credit card spending, is an indicator of increased consumer spending which fuels roughly 70 percent of the economy.

Retail Sales

And when it comes to consumer activity, retail sales for December hit $469.1 billion, which was 6 percent higher than November’s sales, the Census Bureau reported last week. Compared to the same period a year ago, December’s performance was 4.1 percent higher than December 2015’s sales.

“American consumers remain remarkably resilient, and after a slow start to the holiday season, retail sales picked up momentum,” Customer Growth Partners President Craig Johnson told the Wall Street Journal. “[Consumers] are shopping at a rate not seen since the mid-2000s — just not so much at the mall.”

The open road was calling consumers last month, with automobile dealer and auto parts sales growing 2.4 percent, and gas station sales growing 2 percent. Other key retail growth sectors were non-store retailers, such as online and kiosk sales, which grew 1.3 percent; retail food services, which saw sales increase 0.6 percent; and sales at furniture stores and building material and garden supply stores, which notched up 0.5 percent.

Initial Jobless Claims

Turning to employment, layoffs continued to perform in yo-yo-like fashion. After taking a sizable drop in the last report, first-time claims for unemployment benefits filed by the recently unemployed took a jump.

Initial jobless claims for the week ending January 7 hit 247,000, a jump of 10,000 claims over the preceding week’s level of 237,000, the Employment and Training Administration reported last week. The four-week moving average — considered a more stable measure of layoffs — dipped to 256,500, a drop of 1,750 claims from the prior week’s average of 258,250.

This marked the 97th straight week of first-time claims falling below 300,000, which is a level economists consider an indicator of a growing job market. This is the longest such streak since 1970.

This week, we can expect:

  • Wednesday — Consumer price index for December from the Bureau of Labor Statistics; industrial production and capacity utilization for December from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; housing starts and building permits for December from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: January 11, 2017
January 11, 2017


 

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:

  • 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.

Posted in Economic Advisor



Economic Advisor: January 5, 2017
January 5, 2017


 

Despite a light slate of economic releases due to many reporting agencies being closed for the holidays, there were two key announcements: lay-offs tumbled while consumer confidence kept growing.

Initial Jobless Claims

Following a sharp increase over the previous week, first-time claims for unemployment benefits filed by the recently laid off during the week ending Dec. 24 dropped to 265,000, a decline of 10,000 claims from the prior week’s total of 275,000, the Employment and Training Administration reported.

The four-week moving average — considered a steadier gauge of lay-offs — notched down to 263,000, a slight drop of 750 claims from the preceding week’s average of 263,750.

This marked the 95th straight week of initial jobless claims remaining below 300,000 claims, a level that economists consider to be an indicator of a growing job market. This is the longest such streak since 1970.

“On the whole, we continue to expect further improvement in labor market conditions,” Barclays economist Michael Gapen told the Wall Street Journal.

Consumer Confidence

Consumer confidence repeated its November increase with another gain in December. The Consumer Confidence Index grew from November’s 109.4 to 113.7 in December, The Conference Board reported last week. (A baseline of 100 was set in 1985.)

The Expectations Index, which measures consumers’ outlook on the economy’s prospects over the next six months, surged from 94.4 to 105.5. That said the Present Situation Index, which measures consumer’s outlook on current economic conditions, dropped from November’s 132 to 126.1 in December.

“Consumer Confidence improved further in December, due solely to increasing Expectations which hit a 13-year high (Dec. 2003, 107.4),” noted Lynn Franco, The Conference Board’s director of economic indicators. “The post-election surge in optimism for the economy, jobs and income prospects, as well as for stock prices which reached a 13-year high, was most pronounced among older consumers.

“Consumers’ assessment of current conditions, which declined, still suggests that economic growth continued through the final months of 2016,” she added. “Looking ahead to 2017, consumers’ continued optimism will depend on whether or not their expectations are realized.”

In terms of the overall economy, the portion of consumers reporting in December that they expected business conditions to advance during the next six months, grew from 16.4 percent to 23.6 percent, while the share of consumers saying they anticipated that business conditions would worsen dipped from 9.9 percent to 8.7 percent.

Looking at jobs, the number of consumers saying they predicted there would be an increase in jobs during coming months expanded from 16.1 to 21 percent. That said, consumers saying they anticipated jobs would shrink also increased, growing from 13.5 percent to 14 percent. Where incomes were concerned, the population of consumers saying they predicted their incomes would grow rose from 17.4 percent to 21 percent, while the percentage of consumers that said they were expecting a drop in salary fell from 9.2 percent to 8.6 percent.

This week will see the return of a normal slate of economic announcements. We can expect:

  • Tuesday — November construction spending from the Census Bureau.
  • Wednesday — Car and truck sales for December from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Factory orders for November from the Census Bureau; November balance of trade from the Census Bureau and the Bureau of Economic Analysis; December payrolls, unemployment rate, hourly earnings, and average workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



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