Last Week’s Economic News In Review
Retail sales enjoyed healthy growth, while housing starts and building permits saw mixed performance, and lay-offs increased.
Retail sales for May performed solidly, with sales growing 0.5 percent to hit $455.6 billion, the Census Bureau reported last week. Compared annually, last month’s sales were 2.5 percent higher than May 2015, and sales for the March 2016 through May 2016 period were 2.4 percent higher than the same period from last year.
Gas stations posted the largest sales increase for May, growing 2.1 percent over April. Music store sales grew 1.3 percent, as did non-store retailers; food service and drinking establishment sales increased 0.8 percent; and health and personal care stores grew 0.6 percent. Some trouble spots included building and garden supply store sales, which dropped 1.8 percent; miscellaneous retailers, which fell 1.2 percent; and department stores, which shrank 0.9 percent.
If anything, many economists welcomed the report after the recent weak jobs report for May, as it showed that this key segment of the economy (consumer spending drives 70 percent of the U.S. economy) was growing.
“The strength of the May retail sales report should provide plenty of comfort to those concerned that the recent slump in payrolls would be followed by a downturn in activity,” Capital Economics’ U.S. Economist Steve Murphy told the New York Times.
Home construction in May saw inconsistent performance. Construction starts on all types of housing during the month dropped 0.3 percent to an annual rate of 1.16 million, the Census Bureau’s reported last week.
The main contributor to the drop was the multi-family housing category, which is subject to greater swings. Starts on multi-family units dipped 1.2 percent to hit an annual rate of 400,000. Meanwhile, starts on single-family homes actually increased 0.3 percent to an annual rate of 764,000.
On the positive side, building permits issued in May for the construction of private housing grew 0.7 percent to an annual rate of 1.13 million. That said, the performance for permits was inverse to housing starts. Permits issued for single-family homes dropped 2 percent to a pace of 726,000, while permits for multi-family dwellings increased 5.9 percent to an annual rate of 412,000.
Initial Jobless Claims
Followers of the job market are riding a bit of a roller coaster, as lay-offs increased after dipping the previous week. First-time claims for unemployment benefits filed during the week ending June 11 shot up to 277,000, a sizable jump of 13,000 claims over the prior week’s total of 264,000, the Employment and Training Administration reported last week.
Why are job market analysts watching lay-offs so closely? The Department of Labor’s employment report from three weeks ago showed weaker than expected job creation. When that happens, experts worry that any subsequent near-term spikes in lay-offs could be an indicator of a recession.
Bearing that in mind, the Administration’s report was considerably higher than the anticipated 269,000 claims. However, HSBC Securities USA Economist Ryan Wang said job market watchers shouldn’t get worried quite yet.
“As long as the trend for jobless claims remains low, that suggests that businesses are still relatively confident about the economic outlook,” he told the Bloomberg news service. “We need to see claims above the 300,000 level before we would be concerned about a genuine deterioration in the labor market.”
To Wang’s point, the four-week moving average — considered a more stable measure of lay-off activity — actually notched down to 269,250, a dip of 250 claims from the preceding week’s average of 269,500 claims.
This week we can expect:
- Wednesday — Existing home sales for May from the National Association of Realtors.
- Thursday — Initial jobless claims for last week from the Employment and Training Administration; new home sales for May from the Census Bureau.
- Friday — Durable goods orders for May from the Census Bureau; consumer sentiment for June from the University of Michigan Survey of Consumers.