Weekly Economic Update: July 2017

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Housing starts enjoyed a notable month, while layoffs dropped, and import and export prices declined. 


Housing Starts

Starts on the construction of privately owned housing in June hit a four-month high, growing 8.3 percent to reach an annual rate of 1.215 million, the Census Bureau reported last week. Compared to the same period a year ago, June’s starts were 2.1 percent higher than June 2016’s pace of 1.19 million. Starts on single-family homes in June grew a solid 6.3 percent to hit a rate of 849,000.

Permits issued for the construction of private housing in June grew 7.4 percent over the previous month to hit an annual rate of 1.254 million. Compared to last year, it was 5.1 percent higher than June 2016’s pace of 1.193 million. Permits issued for building single-family homes grew 4.1 percent for the month to reach a pace of 811,000.

Gains in starts and permits are always welcome news to a housing market desperately trying to maintain enough inventory to help control costs, so the news was welcome. However, various experts cautioned that there are only so many homes builders can construct.

“Steady gains in construction are expected over the next year, supported by still-strong fundamental demand for housing,” BMO Capital Markets Senior Economist Jennifer Lee told the Associated Press. “But acting as a bit of a roadblock are problems that the builders face: rising lumber costs, and shortages of labor and lots to build on, which will boost pricing.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending July 15 fell to 233,000, a sizable drop of 15,000 claims from the preceding week’s total of 248,000, according to numbers released last week by the Employment and Training Administration.

Initial jobless claims serve as a good indicator of layoff activity, and last week’s report was well below market expectations of 245,000 claims for the week.

The four-week moving average — regarded as a more reliable measure of initial jobless claims — notched down to 243,750 claims, a drop of 2,250 claims from the prior week’s average of 246,000. This was the 124th week in which initial claims were below the 300,000-claim level, which economists consider is an indicator of a growing job market.

Import and Export Prices

Import prices notched down 0.2-percent in June, according to last week’s report from the Bureau of Labor Statistics. This followed May’s 0.1-percent decrease and was likely driven by lower fuel prices. Fuel prices dropped for the fourth month in a row, dropping 2.1 percent in June, thanks to a 2.2 percent decline in petroleum prices.

Meanwhile, the price index for exports for June ticked down 0.2-percent. This followed May’s 0.5-percent drop. The big driver for June’s decrease was dropping prices for agricultural exports.