News & Events

Economic Advisor: May 23, 2018
May 23, 2018


 

Housing starts dropped, while retail sales enjoyed a boost, and layoffs saw a sizable jump.

Housing Starts

New home construction hit a downturn in April, with starts on housing construction falling to an annual rate of 1.28 million last month, which was 3.7 percent below March’s pace of 1.33 million, according to last week’s report from the Census Bureau. That said, when compared to the same period a year ago, April’s housing starts were 10.5 percent higher than April 2017’s rate of 1.16 million.

While any drop in the creation of new housing is generally considered bad news to a real estate market that is looking for more inventory, TD Economics Senior Economist Leslie Preston, wrote in a research note that construction would trend upwards for the year.

“We expect housing starts to continue to gain ground through 2018, supported by positive fundamentals such as low unemployment and healthy wage increases, which are expected to offset higher mortgage rates,” Preston stated. “At the same time, tight inventories and rising prices will continue to support homebuilding.”

Retail Sales

Retail sales hit $497.6 billion in April, marking a 0.3 percent increase over March, the Census Bureau reported last week. Sales were also up when compared to the same period a year ago. April’s sales were 4.7 percent higher than April 2017’s.

March and April’s gains appear to signal a rebound from January and February’s poor performance. Since consumer spending drives approximately 70 percent of the U.S. economy, some economists were encouraged by the combined gains in March and April.

“Consumption growth is on track for a big rebound in the second quarter, which should push overall GDP growth up to more than 3 percent,” Capital Economics Senior U.S. Economist Michael Pearce told the New York Times.

Categories that helped drive April’s gains included several niches that signal healthy consumer-spending activity. They included sales at clothing and clothing accessories stores, which grew 1.4 percent for the month; miscellaneous retailers, such as online retailers and kiosks, which increased 0.9 percent; and furniture and home furnishings stores, which notched up 0.8 percent.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending May 12 spiked to 222,000, an increase of 11,000 claims from the preceding week’s total of 211,000, the Employment and Training Administration reported last week. The Administration added that the impacts of hurricanes Harvey, Irma, and Maria continued to skew reporting of layoffs.

Meanwhile, the four-week moving average — regarded as a more reliable measure of initial jobless claims — fell to 213,250, a drop of 2,750 claims from the prior week’s average of 216,000. This was the lowest level for the four-week average since December 13, 1969’s average of 210,750. Last week’s report also marked the 167th 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 — New home sales for April from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; existing home sales for April from the National Association of Realtors.
  • Friday — Durable goods orders for April from the Census Bureau; consumer sentiment for May from the University of Michigan Survey of Consumers.

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