Economic Advisor - January 8, 2020


Last Week's Economic News in Review


Housing led an increase in construction spending, while consumer confidence ticked down, and layoffs declined.

Construction Spending

Construction spending for November hit an annual rate of $1.324 trillion, which marked a 0.6 percent gain over October's pace of $1.316 trillion, the Census Bureau reported last week.

This marked the fifth straight monthly gain and a step up from October's small, 0.1 percent increase. It was also slightly better than economists' forecasts of a 0.5 percent gain for the month.

Housing led the growth with residential construction growing to an annual rate of $536.1 billion in November, which was 1.9 percent up from October's rate of $526.3 billion. Spending on construction of single-family homes hit $280.6 billion, which was 1.2 percent higher than October's $277.4 billion.

"Single-family builders are currently reporting ongoing positive conditions, spurred in part by low mortgage rates and continued job growth," said Greg Ugalde, chairman of the National Association of Home Builders. "In a further sign of solid demand, this is the fourth consecutive month where at least half of all builders surveyed have reported positive buyer traffic conditions.

Consumer Confidence

Despite November's increase, consumer confidence retreated in December, with the Consumer Confidence Index declining to 126.5 for the month, down from November's 126.8 (a baseline of 100 was set in 1985), according to The Conference Board, which produces the index.

The decline spoke more to consumers' opinions regarding the near future, more than the here and now: The Present Situation Index, which measures consumers' views on current business and labor conditions, grew from 166.6 to 170 in December. However, the Expectations Index, which gauges consumers' short-term outlook for income, business and labor market conditions, decline from November's 100.3 to 97.4 in December.

"While consumers' assessment of current conditions improved, their expectations declined, driven primarily by a softening in their short-term outlook regarding jobs and financial prospects," noted Lynn Franco, director of Economic Indicators for The Conference Board. "While the economy hasn't shown signs of further weakening, there is little to suggest that growth, and in particular consumer spending, will gain momentum in early 2020."

Initial Jobless Claims

In employment news, first-time claims for unemployment benefits filed by recently unemployed Americans during the week ending Dec. 28 fell to 222,000, a drop of 2,000 claims from the preceding week's total of 224,000, the Employment and Training Administration reported last week. This was slightly better than the smaller drop to 223,000 economists had forecasted.

The four-week moving average - regarded as a more reliable measure of jobless claims - rose to 233,250, which was an increase of 5,000 claims from the previous week's average of 228,500. This marked the 252nd week in which initial claims were below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:
  • Tuesday - Trade deficit and factory orders for November from the Census Bureau.
  • Wednesday - Consumer credit for November from the Federal Reserve.
  • Thursday - Initial jobless claims for last week from the Employment and Training Administration.
  • Friday - Payrolls, unemployment and hourly earnings for December from the Bureau of Labor Statistics; wholesale inventories for November form the Census Bureau.