Economic Advisor June 2020


Last Week's Economic News in Review
June 10, 2020
Last week's economic headlines turned in better than expected performance: Construction spending fell while employment enjoyed an unexpected rebound and layoffs declined.

Construction Spending

Construction spending dropped to an annual rate of $1.346 trillion in April, which was 2.9 percent down from March's pace of $1.386 trillion, according to last week's report from the Census Bureau.

While down, the news came as a relief given that April's decline beat forecasts of a much sharper decline of 6.8 percent. Moreover, compared to the same period a year ago, April's spending was 3 percent higher than April 2019's rate of $1.307 trillion.

Turning to housing, spending on residential construction dipped to an annual rate of $536.8 billion in April, a 4.5 percent decline from March's pace of $561.9 billion.

Spending on construction of single-family homes dropped to an annual rate of $280.9 billion, which was 6.6 below March's rate of $300.8 billion. Spending on multifamily housing declined 9.1 percent in April to a rate of $53.6 billion from March's pace of $58.9 billion.

Employment Situation

After tumbling by 20.7 million jobs in April, the economy surprised job market watchers by adding 2.5 million jobs in May, beating expectations from economists of 7.25 million job losses, the Bureau of Labor Statistics reported last week. Key job growth sectors included leisure and hospitality, construction, education, health services, and retail trade.

May's gains pushed the unemployment rate down to 13.3 percent, and the number of unemployed Americans fell by 2.1 million to 21 million people out of work.

Average hourly earnings for all employees declined by 29 cents to $29.75, following a $1.35 increase in April. The Bureau attributed the decline mainly to job gains in lower-paying jobs, which pushed the average down.

The news that jobs had seen an upturn was unexpected and welcome. That said, the U.S. employment situation remains in dire straits. To put things in perspective, during the peak of the Great Recession, unemployment topped out at 10 percent in October 2009.

Initial Jobless Claims

In employment news, layoffs due to COVID-19's economic impact kept coming.

First-time claims for unemployment benefits filed by recently unemployed Americans during the week ending May 30 fell to 1,877,000, which was a decline of 249,000 claims from the preceding week's total of 2,126,000, the Employment and Training Administration reported last week.

The four-week moving average - regarded as a more reliable measure of jobless claims - dropped to 2,284,000 claims, which was 324,750 claims down from the previous week's average of 2,608,750.

"The good news is the country may have turned the corner in the coronavirus pandemic, but the bad news is economic growth is going to just limp along if it has to carry millions and millions of jobless workers who cannot support themselves and are running out of benefits to pay the bills," MUFG chief economist Chris Rupkey told the Reuters news service.

This week, we can expect:
  • Tuesday - Wholesale inventories for April from the Census Bureau.
  • Wednesday - Consumer prices for May from the Bureau of Labor Statistics.
  • Thursday - Initial jobless claims for last week from the Employment and Training Administration; producer prices for May from the Bureau of Labor Statistics.
  • Friday - Import prices from the Bureau of Labor Statistics; consumer sentiment for June from the University of Michigan Surveys of Consumers.