News & Events

Economic Advisor: July 11, 2018
July 11, 2018


Construction of new homes surged, and the nation’s overall employment situation continued to improve despite layoffs seeing some unexpected growth.

Construction Spending

Construction spending rose 0.4 percent in May to hit an annual rate of $1.309 trillion, marking a record high, according to last week’s report from the Census Bureau. Compared to last year, May’s spending was 4.5 percent higher than May 2017’s pace of $1.253 trillion.

Private construction spending was the big driver, growing 0.3 percent to an annual rate of $1.005 trillion, with residential construction growing a solid 0.8 percent to an annual rate of $553.8 billion for the month. Spending on construction of single-family homes grew 0.6 percent to reach an annual rate of $288.2 billion, and spending on multi-family units rose 1.6 percent to $61.8 billion.

This was welcome news for a housing market hungry for inventory, which helps keep prices under control, but external factors might temper that growth in the near future.

“Single-family homebuilding is continuing to expand, while multi-family construction has pulled out of a recent slump …,” noted Ken Simonson, chief economist for the Associated General Contractors of America, in a statement about May’s spending. “However, rising materials costs and shortages of qualified workers may stall all types of projects.”

Employment Situation

The economy added 213,000 jobs in June, but the unemployment rate rose to 4 percent, up from May’s 3.8 percent, the Bureau of Labor Statistics reported last week. Key job-growth sectors included professional and business services, manufacturing, and healthcare, while the retail sector lost jobs.

The population of unemployed Americans rose by 499,000 to 6.6 million people, but the reason for the increase was because the labor force participation rate — the number of employable people actively working or looking for work — increased in June. The labor force increased by 601,000 people, pushing the labor force participation rate up by 0.2 percent to 62.9 percent.

Looking at compensation, average hourly wages rose by five cents in June to hit $26.98. Over the past 12 months, average hourly earnings have grown by 72 cents, or 2.7 percent. Could wages go higher? Yes, if employers need to entice new hires, and there appears to be a shortage of employees, according to Mark Zandi, chief economist for Moody’s Analytics, which released a hiring report with Payroll processor ADP last week. 

“Business’ number one problem is finding qualified workers,” Zandi remarked in the report. “At the current pace of job growth, if sustained, this problem is set to get much worse.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending June 3 took an unexpected upswing, growing to 231,000, a gain of 3,000 claims over the prior week’s total of 228,000, according to last week’s report from the Employment and Training Administration. Economists had expected layoffs to fall to 225,000.

The four-week moving average, which is considered a more stable measure of jobless claims, grew to 224,500, an increase of 2,250 claims from the preceding week’s average of 222,250 claims.

Despite the unanticipated upturn, the job market remains healthy. This latest report marked the 174th straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Monday — Consumer credit for May from the Federal Reserve.
  • Wednesday — Producer prices for June from the Bureau of Labor Statistics; wholesale inventories for May from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; consumer prices for June from the Bureau of Labor Statistics; federal budget for June from the Treasury Department.
  • Friday — Import prices for June from the Bureau of Labor Statistics.

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