News & Events

Economic Advisor: March 7, 2018
March 7, 2018


New homes suffered a setback, but construction spending increased. Meanwhile, layoffs declined to lows not seen in decades.

New Home Sales

Sales of new, single-family houses dropped 7.8 percent in January 2018 to an annual rate of 593,000, according to last week’s joint report from the Census Bureau and the Department of Housing and Urban Development. This marked the lowest sales volume in five months. Compared to the same period last year, January’s sales were 1 percent lower than January 2017’s pace of 599,000.

Looking at price, January’s average sales price for new homes was $382,700, and the median sales price was $323,000. Looking at supply, the estimated number of new homes for sale at January’s close was 301,000, representing a 6.1-month supply at January’s sales rate. Supply has not been this high since 2009.

“The drop in sales may be due to saturation in the upper price range of the market, which should compel builders to follow the market and build more moderately-priced homes,” Senior Economist Joseph Kirchner told the Reuters news service.

Construction Spending

Speaking of building new homes, construction spending saw little change in January, the Census Bureau reported last week. January posted an annual rate of $1.2628 trillion, which was nearly identical to December’s pace of $1.2627 trillion. Compared to the same period last year, January’s construction spending was 3.2 percent higher than January 2017’s rate of $1.2235 trillion.

Spending on private construction ticked down 0.5 percent to an annual rate of $962.7 billion, with residential construction growing 0.3 percent to an annual rate of $523.2 billion in January. Construction spending for single-family homes grew 0.6 percent to an annual rate of $277.7 billion, while spending on multi-family units declined 1.3 percent to a rate of $61.1 billion.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending February 24 fell to 210,000, a drop of 10,000 claims from the preceding week’s total of 220,000, the Administration reported last week. This marked the lowest level for initial jobless claims since December 6, 1969’s report of 202,000. The Administration added that the impacts of hurricanes Harvey, Irma, and Maria continued to skew layoffs data. 

The four-week moving average — regarded as a more reliable measure of initial jobless claims — dropped to 220,500 claims, a fall of 5,000 claims from the prior week’s average of 225,500. This was the lowest average since December 27, 1969’s four-week average of 219,750. Last week’s report also marked the 156th 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:

  • Tuesday — Factory orders for January from the Census Bureau.
  • Wednesday — Balance of trade for January from the Bureau of Economic Analysis; consumer credit for January from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Wholesale inventory is for February from the Census Bureau; payrolls, unemployment rate, average work week, and hourly earnings for February from the Bureau of Labor Statistics.

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