News & Events

Economic Advisor: January 24, 2018
January 24, 2018


 

Housing starts were down, while consumer sentiment fell slightly, and layoffs plummeted.

Housing Starts

Construction starts on new homes saw a tough decline in December, dropping 8.2 percent to an annual rate of 1,192,000 for the month, the Census Bureau reported last week. The reason for the drop? Starts on single-family homes plummeted 11.8 percent to an annual rate of 836,000.

“The pace of housing starts averaged just 1.2 million for the year, far short of the historical average of 1.5 million starts,” Nela Richardson, chief economist at the real estate company Redfin, told the New York Times. “Given the three-year drought in inventory and surging homebuyer demand, a pace of 2 to 3 million starts would be reasonable and appropriate.”

Compared to last year, December’s housing starts were 6 percent below December 2016’s pace of 1,268,000. The market had expected December’s annual rate to be 1,280,000. All told, construction starts for 2017 hit an estimated total of 1,202,100 units, which was 2.4 percent higher than 2016’s total of 1,173,800 units.

Building permits issued for construction of private housing in December ticked down 0.1 percent to 1,302,000. Permits issued for construction of single-family homes rose 1.8 percent to hit a rate of 881,000.

Consumer Sentiment

Consumer Sentiment for January fell to 94.4, down 1.6 percent from December’s 95.9, the University of Michigan’s Surveys of Consumers reported last week.

The Current Economic Conditions Index, which measures how consumers feel about the current economy and their prospects in it, fell 4 percent to 109.2. However, the Index of Consumer Expectations grew slightly by 0.6 percent to hit 84.8

The upshot is that while American consumers might have some trepidations, they are engaged and willing to participate in the retail marketplace.

“Importantly, the survey recorded persistent strength in personal finances and buying plans, while favorable levels of buying conditions for household durables have receded to preholiday levels in early January, largely due to less attractive pricing,” said Surveys of Consumers Chief Economist Richard Curtin.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending January 13, plummeted to 220,000, a considerable decline of 41,000 claims from the prior week’s total of 261,000, according to last week’s report from the Employment and Training Administration. This was the lowest weekly total since February 24, 1973’s total claims of 218,000.

The four-week moving average, which is considered a more stable measure of jobless claims, dropped to 244,500, a decrease of 6,250 claims from the preceding week’s average of 250,750 claims.

This latest report marked the 150th straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market. The Administration added that it continues to experience hurricane-related reporting difficulties in the Virgin Islands and Puerto Rico.

This week, we can expect:

  • Wednesday — Existing home sales for December from the National Association of Realtors.
  • Thursday — New home sales for December from the Census Bureau; leading economic indicators for December from The Conference Board; initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Durable goods orders for December from the Census Bureau; Fourth Quarter GDP from the Bureau of Economic Analysis.

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