News & Events

Economic Advisor: November 8, 2017
November 8, 2017


 

Construction spending grew more than predicted while unemployment was down and lay-offs continued to fall.

Construction Spending

Construction spending for September beat expectations growing 0.3 percent to hit an annual rate of 1.219 trillion, the Census Bureau reported last week. This was the highest gain in four months and surpassed analyst’s predictions of a flat, no-growth month. Compared to last year, September’s spending was 2 percent higher than September 2016’s rate of $1.195

The growth, however, was mainly in public construction spending, which was $276.8 billion for the month, marking a 2.6 percent gain over August’s pace of $269.8 billion. Meanwhile, pending on private construction dropped to an annual rate of $942.7 billion, which was 0.4 percent below August’s rate of $946.2 billion.

Spending on residential construction was flat. September’s spending hovered at an annual rate of $515.4 billion for the month, which was nearly unchanged from August’s pace of $515.6 billion. For a housing market that is desperate to see more inventory in order to temper prices, this was not good news.

Employment

The economy added 261,000 jobs in October, notching the unemployment rate down to 4.1 percent from September’s 4.2 percent, according to last week’s report from Bureau of Labor Statistics. The number of out-of-work Americans correspondingly dropped by 281,000 to 6.5 million.

Average hourly earnings for all employees were essentially unchanged at $26.53, which was one cent down from September (which had seen a 12-cent upturn). Compared to the same period last year, average hourly earnings were up just 63 cents.

That slow growth is making wages a sticking point for some job market watchers. While the job market has steadily improved since the 2008 housing market bust and ensuing Great Recession, earnings are only just keeping up with inflation. This recent report had many economists wondering when American workers would see meaningful wage growth.

“It’s certainly trending the right way, but it’s surely still unexciting — even unacceptable — wage growth at this point,” Euler Hermes North America chief economist Dan North told the New York Time.

Initial Jobless Claims

In related news first-time claims for unemployment benefits filed by the newly unemployed during the week ending Oct. 28, dropped to 229,000, a gain of 5,000 claims from the prior week’s total of 234,000, according to last week’s report from the Employment and Training Administration.

The four-week moving average, which is considered a more stable measure of jobless claims fell to 232,500, a decline of 7,250 claims from the preceding week’s average of 239,750 claims. This was the lowest four-week average since April 7, 1973’s 232,250.

This latest report marked the 139th straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market.

As for the recent hurricane’s impact on jobless claims reporting, the Administration advised that reporting was back to normal in the continental United States, and that Puerto Rico is not able to process backlogged claims, but that the Virgin Island’s ability to do so was still “severely disrupted.”

This week, we can expect:

  • Tuesday — Consumer credit for September from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; wholesale inventories for September from the Census Bureau.
  • Friday — Consumer sentiment for November from the University of Michigan Surveys of Consumers; budget for October from the Department of Treasury.

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