News & Events

Economic Advisor: March 21, 2018
March 21, 2018


Housing starts fell, as did retail sales. Meanwhile, layoffs were down.

Housing Starts

Construction starts on private homes fell a sizable seven percent in February to an annual rate of 1.236 million, the Census Bureau reported last week. Compared to last year, this was four percent below February 2017’s rate of 1.288 million.

A key cause for the drop was starts on buildings with five or more units, which fell a considerable 28 percent from 440,000 in January to 317,00 in February. Meanwhile, starts on single-family housing starts in February grew 2.9 percent to a rate of 902,000, up from January’s 877,000.

Building permits issued for new homes — a good indicator of future construction — dropped 5.7 percent from January’s annual rate of 1.377 million to 1.298 million in February. Permits for single family homes ticked down 0.6 percent to a rate of 872,000 in February.

Any narrowing in the housing supply is some cause for concern as it could influence prices, but the housing market has been on a largely positive trend thanks to the job market. The key will be to see whether or not the housing market’s gains will remain stable despite possible rate increases.

“Soaring employment and faster wage growth should support the housing market, but activity is going to be constrained by higher rates,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Retail Sales

Retail sales fell for the third consecutive month in February, dropping 0.1 percent to $492 billion, the Census Bureau reported last week. That said, when compared to last year, February’s sales were 4 percent higher than those of February 2017.

Several key categories experienced declines: gas stations were down 1.2 percent; motor vehicle dealers and car parts stores, as well as department stores all fell 0.9 percent; furniture and home furnishing stores dropped 0.8 percent; and general merchandise, health and personal care stores all fell 0.4 percent.

Bloomberg Economics economists Carl Riccadonna and Yelena Shulyatyeva noted that consumers were not following up their positive attitudes with actions.

“A disappointing retail sales result in February was slightly less bad in light of revisions to January, nonetheless, back-to-back-to-back sales declines reaffirm both the intransigent sluggishness of consumer spending, and hence overall economic growth, and as a result the limited capacity for consumer inflation to accelerate on a sustained basis,” the pair wrote in a public statement. “To be sure, the past few months provide a clear example of a period in which consumers’ attitudes and actions have materially diverged. Consumer sentiment and confidence are running at cyclical highs, but spending is foundering.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending March 10 fell to 226,000, a drop of 4,000 claims from the preceding week’s total of 230,000, the Employment and Training Administration reported last week. 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 221,500 claims, a fall of 750 claims from the prior week’s average of 222,250. Last week’s report also marked the 158th 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:

  • Wednesday — Existing home sales for February from the National Association of Realtors.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for February from The Conference Board.
  • Friday — Durable goods orders and new home sales for February from the Census Bureau.

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