Last Week’s Economic News in Review
Construction spending fell, but residential construction was unaffected. Meanwhile, the U.S. economy added solid job numbers, but consumer credit saw weak growth.
Construction spending for June fell 0.6 percent to an annual rate of $1.133 trillion, marking the third straight month of declines, according to data released last week by the Census Bureau. While down for the month, when compared annually, June’s rate was 0.3 percent higher than June 2015’s pace of $1.130 trillion.
Spending on private construction reflected the monthly trend, falling 0.6 percent in June to an annual rate of $851 billion, but residential construction for the month held its own, coming in at an annual rate of $445.8 billion, which was nearly unchanged from May’s rate of $445.9 billion. Meanwhile, nonresidential construction dropped a significant 1.3 percent to an annual rate of $405.2 billion for the month.
“The drop in construction spending over the past three months is probably more a reflection of the very strong gains posted early in the year than of cooling demand for construction,” Ken Simonson, chief economist for the Associated General Contractors of America, noted in a public statement. “Nearly every major segment had first-half gains of more than 5 percent compared with a year ago. Contractors, surveys and the media all continue to report plenty of projects are starting or will soon.”
The U.S. economy enjoyed strong job numbers for the second month in a row, with the workforce adding 255,000 jobs in July, the Bureau of Labor Statistics reported last week. This was well ahead of market expectations for only 185,000 new jobs. Key sectors for job growth included professional and business services, healthcare and financial services.
The unemployment rate held steady at 4.9 percent with the total number of unemployed Americans also hovering at 7.8 million. The number of people unemployed for 27 weeks or longer (referred to as the long-term unemployed) was also unchanged in July, accounting for 26.6 percent of the total unemployed population. Also, the number of Americans involuntarily employed part-time for economic reasons, such as their hours being cut or that being the only work they could find, had little change at 5.9 million in July.
But, turning to wages, average hourly earnings for all employees grew by 8 cents in July to $25.69, and over the year, average hourly earnings rose by 2.6 percent. So, while many metrics saw no movement, the wage increases along with the job growth were reason enough for many economists to see the numbers as encouraging.
“This is a validator,” Barclays’ Chief U.S. Economist Michael Gapen told the New York Times. “This is a report that indicates that the slowdown in hiring earlier in the year has been reversed.”
Total consumer credit for June increased 4.1 percent to hit $3.633 trillion for the month, according to the Federal Reserve’s report from last week. The $12.3 billion gain for the month was the slowest pace of increase in four years and well below the $16.2 billion increase that the market had expected.
Revolving debt, such as credit card purchases, saw the biggest gains for the month, growing 9.7 percent to hit $960.8 billion. Meanwhile, non-revolving debt, such as car and student loans, notched up by 2.1 percent to hit $2.673 trillion.
Many economists chalked up the decline in revolving debt — which drove the overall debt slowdown for June — to lagging auto sales, which of course translated to fewer car loans. To put things in perspective, car sales in the first half of 2015 grew by 4 percent, and 2015 saw a record 17.5 million new vehicles sold. Meanwhile, car sales in the first half of this year have only grown 1.5 percent.
This week we can expect:
- Tuesday — Preliminary second quarter productivity from the Bureau of Labor Statistics; June wholesale inventories from the Census Bureau.
- Wednesday — July budget from the Treasury Department.
- Thursday — Initial jobless claims for last week from the Employment and Training Administration; July import and export prices from the Census Bureau.
- Friday — Producer price index for July from the Bureau of Labor Statistics; July retail sales and June business inventories from the Census Bureau.