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Economic News: March, 8, 2017

Economic News

Spending on residential construction grew despite a monthly overall drop. Meanwhile, monthly incomes and spending totals offered mixed performance, and layoffs fell to their lowest point in nearly 44 years.

Construction Spending

Construction spending for January grew to an annual rate of $1.18 trillion, marking a 1 percent dip from December’s rate of of $1.19 trillion, the Census Bureau reported last week. Compared annually, January’s overall construction spending was 3.1 percent higher than January 2016’s annual rate of $1.14 trillion.

While overall spending was down, spending on private construction was up, growing 0.2 percent over December 2016’s rate of $909.4 billion to an annual rate of $911.6 billion for the month.

Residential construction spending hit an annual rate of $476.4 billion in January, which was 0.5 percent higher than December’s pace of $474 billion. Construction spending on single-family homes grew to an annual rate of $253,806, which was 1.1 percent up from December 2016’s spending. Spending on construction of multi-family units grew 2.2 percent for the month to an annual rate of $63.5 billion.

Incomes and Spending

Incomes were up while spending fell behind. Personal incomes for January grew 0.4 percent for a $63 billion gain according to last week’s report from the Bureau of Economic Analysis. This beat out market predictions of a 0.3 percent gain. Disposable personal income (DPI; income after taxes) grew 0.3 percent for a gain of $40.1 billion.

Meanwhile, personal consumption expenditures (PCE) for January increased 0.2 percent for a $22.2 billion increase. This was off from predictions of a 0.3 percent increase.All told, personal outlays (which include PCE, as well as other outlays such as interest and mortgage payments) grew $24 billion in January. This put personal savings for January at $795.7 billion, and the personal saving rate (personal saving as a percentage of PDI) at 5.5 percent.

“Bottom line, there was a decline in real spending in January as higher inflation took a greater share of spend,” Peter Boockvar of economic advisers The Lindsey Group wrote last week. “This points to the importance of quicker wage growth which hopefully we soon get even though I’ve been saying that for a while. The Fed will raise rates in two weeks but that will only bring the fed funds rate to just .875 percent with real interest rates still firmly negative.”

 Initial Jobless Claims

Layoffs continued their long-running drop with initial jobless claims falling to their lowest point since March 1973. First-time claims for unemployment benefits filed by the newly laid off during the week ending February 25 plummeted to 223,000, a drop of 19,000 claims from the prior week’s total of 242,000. Jobless claims haven’t been this low since March 31, 1973’s total of 222,000 claims.

The four-week moving average — considered a more stable gauge of layoffs — dropped to 234,250 claims, a decline of 6,250 claims from the preceding week’s average of 240,500. This was the lowest level for the average since April 14, 1973’s average of 232,750.

All told this marked the 104th week that jobless claims have come in below the 300,000-claim mark that economists consider indicates a growing job market.

This week, we can expect a light calendar of economic reports, due to the holidays:
Monday — Factory orders for January from the Census Bureau.
Tuesday — The trade balance for January from the Census Bureau; consumer credit for January from the Federal Reserve.
Wednesday — Revised fourth quarter productivity from the Bureau of Labor Statistics; January wholesale inventories from the Census Bureau.
Thursday — February import and export prices from the Census Bureau; initial jobless claims for last week from the Employment and Training Administration.
Friday — February budget from the Treasury Department; February unemployment, payrolls, hourly earnings and average workweek from the Bureau of Labor Statistics.