News & Events

Economic Advisor: July 12, 2017
July 12, 2017


 

Construction spending showed no movement, while the economy added jobs in June, and recent layoff activity slightly ticked up.

Construction Spending

Construction spending for May was flat at an annual rate of $1.2301 trillion, which was nearly identical to April’s pace of $1.2304 trillion, the Census Bureau reported last week. That said, compared to the same period last year, May’s total spending was 4.5 percent higher than May 2016’s rate of $1.177 trillion.

Spending on private construction fell 0.6 percent to an annual rate of $943.2 billion, down from April’s pace of $949.3 billion. Spending on residential construction also fell at a similar rate, dropping to a pace of $509.6 billion for May, which was 0.6 percent below April’s annual rate of $512.7 billion.

Construction has been a key indicator for housing market watchers, as supply has been a lynchpin when it comes to sales volume. Increased inventory keeps prices down, which makes increased sales activity. Unfortunately, construction hasn’t been doing that.

“Construction activity, unfortunately, continues to disappoint,” BMO Capital Markets Economist Jennifer Lee told the New York Times. “If June is flat again, that would mean a negative quarter for construction.”

Employment

In employment news, the U.S. economy added 222,000 non-farm jobs in June, putting the unemployment rate slightly up at 4.4 percent, the Bureau of Labor Statistics reported last week. Key job-growth sectors for the month included healthcare, social assistance, financial activities, and mining.

All told, there were 7 million unemployed Americans in June. The number of long-term unemployed — people without jobs for 27 weeks or longer — continued to hover at 1.7 million in June, which represented 24.3 percent of the unemployed population. Over the year, the population of long-term unemployed Americans has shrunk by 322,000 people.

The labor force participation rate—the number of employable Americans who are either looking for work or who have secured a job — was at 62.8 percent for June, which was roughly the same as May.

The number of persons involuntarily employed on a part-time basis for reasons such as having their hours cut, or that being the only work they could get was essentially unchanged at 5.3 million in June.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending July 1 hit 248,000, a gain of 4,000
claims over the preceding week’s total of 244,000, according to numbers released last week by the Employment and Training Administration.

Initial jobless claims serve as a good indicator of layoff activity, and last week’s report was close to market expectations of 244,000 claims for the week. This was the third straight week of jobless claim increases, albeit small ones.

The four-week moving average — regarded as a more reliable measure of initial jobless claims — ticked up to 243,000
claims, a slight increase of 750
claims from the prior week’s average of 242,250. This was the 122nd week in which initial claims were below the 300,000-claim level, which economists consider is an indicator of a growing job market.

This week, we can expect:

  • Monday — Consumer credit for May from the Federal Reserve.
  • Tuesday — Wholesale inventories for May from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; Federal budget for June from the Treasury Department.
  • Friday — Consumer price index for June from the Bureau of Economic Analysis; retail sales for June and business inventories for May from the Census Bureau; industrial production and capacity utilization for June from the Federal Reserve.

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