News & Events

Economic Advisor: July 25, 2018
July 25, 2018


Housing starts experienced a sharp drop, while retail sales enjoyed solid growth, and layoffs dropped to lows not seen in nearly 50 years.

Housing Starts

Starts on construction of private housing fell to a nine-month low, dropping 12.3 percent from May to an annual rate of 1.17 million, the Census Bureau and Department of Housing and Urban Development jointly reported last week. Compared to last year, this was 4.2 percent below June 2017’s rate of 1.22 million.

Construction starts on single-family homes fell 9.1 percent in June to an annual rate of 858,000. Starts on buildings with five units or more plummeted 20.2 percent to 304,000.

For a real estate market desperate for inventory, this was not the best news. Most housing experts attributed the slowdown in housing construction to increased materials costs caused by the recent tariff war.

“The sector is struggling to manage labor shortages and sharply higher materials costs,” Alfstad Capital CEO Mike Alfstad told Baron’s. “It appears that is holding back building on spec. Might this also be the canary in the coal mine on tariffs?”

Retail Sales

Retail sales saw substantial growth in June, growing 0.5 percent to $506.8 billion, marking the largest monthly gain since September 2017, according to last week’s report from the Census Bureau. Compared to last year, June’s sales were 6.6 percent higher than June 2017’s retail sales.

Retail categories that saw solid gains were sales at health and personal care stores, which grew 2.2 percent; food services and drinking places, which increased 1.5 percent; non-store retailers, such as kiosks and online stores, which rose 1.3 percent; gas stations, which gained one percent; auto and other vehicle dealers, which notched up one percent.

Consumer spending drives roughly 70 percent of the U.S. economy, so continued gains in retail sales were good news to economists.

“This puts the economy in a very, very good position as it starts its 10th year of forward movement in July,” MUFG Chief Economist Chris Rupkey told the Reuters news service. “This strengthening economy gives the Federal Reserve the green light to raise rates a third time this year at their September meeting.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending July 14 dropped to 207,000, a decline of 8,000 claims over the prior week’s total of 215,000, according to last week’s report from the Employment and Training Administration. This was well below economists’ expectations of 224,000, and the lowest level of first-time jobless claims since December 6, 1969.

The four-week moving average, which is considered a more stable measure of jobless claims, fell to 220,500, a drop of 2,750 claims from the preceding week’s average of 223,250 claims.

The latest report marked the 176th 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 — Existing home sales for June from the National Association of Realtors.
  • Wednesday — New home sales for June from the Census Bureau and Department of Housing and Urban Development.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; durable goods orders for June from the Census Bureau.
  • Friday — Consumer sentiment for July from the University of Michigan Surveys of Consumers; second quarter GDP from the Bureau of Economic Analysis.

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