News & Events

Economic Advisor: June 6, 2018
June 6, 2018


 

Construction spending hit a record high, while the unemployment rate dropped to a level not seen for nearly 20 years. Meanwhile, layoffs fell further than expected.

Construction
Spending

After seeing a decline in March, construction spending rebounded to a record high in April, growing 1.8 percent to an annual rate of $1.31 trillion, according to last week’s report from the Census Bureau. Compared to last year, April’s spending was 7.6 percent higher than April 2017’s pace of $1.21 trillion.

Looking specifically at housing, spending on residential construction in April shot up to an annual rate of $556.3 billion, which was 4.5 percent higher than March’s pace of $532.4 billion. While April’s spending on single-family home construction was virtually unchanged from March’s $285 billion, when compared to last year, it was a whopping 9.6 percent higher than April 2017’s $260.7 billion.

“The April jump reversed the March drop, but the bigger picture here is that this is the fifth 1-percent-plus increase in the past six months,” Pantheon Macroeconomics Chief Economist Ian Shepherdson told MarketWatch. “The strength is across the board, public and private, residential and commercial, with the only softer spot being the state and local government sector, where huge volatility is normal.”

Employment

The economy added 223,000 jobs in May pushing the unemployment rate down to 3.8 percent, the lowest level since April 2000, the Bureau of Labor Statistics reported last week. The big growth sectors for jobs last month were retail, healthcare and construction.

All told, the number of unemployed Americans dropped to 6.1 million in May. For the year, the unemployed population has fallen by 772,000 and the unemployment rate has declined 0.5 percent.

Average hourly earnings notched up eight cents in May to $26.92. Over the past 12 months, average hourly earnings have grown by 71 cents, or 2.7 percent. Those income gains, paired with the employment increases, led many economists to conclude that the Federal Reserve will likely increase rates.

“The strength of the labor market supports our forecast for the Fed to raise rates three more times this year,” Moody’s Analytics senior economist Ryan Sweet told the Reuters news service. “The Fed is going to get antsy that the labor market will blow too far past full employment.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending May 26 tumbled to 221,000, a fall of 13,000 claims from the preceding week’s total of 234,000, the Employment and Training Administration reported last week. This was considerably lower than the 228,000 layoff claims that job market watchers had anticipated.

Meanwhile, the four-week moving average — regarded as a more reliable measure of initial jobless claims — grew to 222,250, a gain of 2,500 claims from the prior week’s average of 219,750. Last week’s report also marked the 169th week in which initial claims were below the 300,000-claim level, which economists consider an indicator of a growing job market.

The Administration added that the impacts of hurricanes Harvey, Irma, and Maria continued to throw off reporting of layoffs.

This week, we can expect

  • Monday — Factory orders for April from the Census Bureau.
  • Wednesday — Balance of trade for April from the Census Bureau; labor productivity for the first quarter from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; consumer credit for April from the Federal Reserve.
  • Friday — Wholesale inventories for April form the Census Bureau.

 

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