Economic Advisor

 

Last Week's Economic News in Review
June 3, 2020

 

New home sales enjoyed an unexpected increase, and jobless claims declined but remained at very high levels. Meanwhile, incomes enjoyed substantial gains while consumer spending tumbled.


New Home Sales

Despite COVID-19's economic toll, sales of new single-family homes grew in April, ticking up 0.6 percent over March's annual rate of 619,000 to hit a pace of 623,000, the Census Bureau and the Department of Housing and Urban Development jointly reported last week.

Compared to the same period a year ago, April's sales were 6.2 percent down from April 2019's rate of 664,000.

Looking at price, the median sales price for new homes sold in April 2020 declined to $309,900, which was 5.2 percent down from March's price of $326,900. Looking at inventory, the number of new homes for sale at the end of April was 325,000, representing a 6.3-month supply at April's sales rate.

One possible reason for April's counter-intuitive gain: a portion of Americans now working from home due to COVID-19 might have decided they needed more room or better amenities.

"As remote work policies are being extended into 2021 by a growing number of companies, and likely to become permanent in some cases, demand for home offices is projected to grow," Realtor.com senior economist George Ratiu told the Associated Press. "If homebuilders can respond to these shifting preferences, sales of new homes may see a swifter rebound in the months ahead."

Initial Jobless Claims

Layoffs continued to come in at very high levels due to COVID-19's economic impact but continued to decline.

Initial jobless claims filed by recently unemployed Americans during the week ending May 23 fell to 2,123,000, a drop of 323,000 claims from the previous week's 2,446,000 claims, the Employment and Training Administration reported last week.

The four-week moving average, which is considered a more stable measure of jobless claims, declined to 2,608,000, which was 436,000 claims fewer than the preceding week's average of 3,044,000 claims.

A record-setting 40.7 million Americans have applied for unemployment insurance since March 21.

"We think these filings in the 10 weeks since the mid-March coronavirus pandemic lockdown tell the true story of the wreckage out there in the country and the enormous long-term damage done to the economy," MUFG chief economist Chris Rupkey told the Reuters news service.

Spending and Incomes

After declining in March and despite COVID-19, personal incomes grew by $1.97 trillion, or 10.5 percent in April, according to last week's report from the Bureau of Economic Analysis (tables 3 and 5). Disposable personal income (DPI), which is income after taxes, rose by $2.13 trillion, or 12.9 percent.

"The increase in personal income in April primarily reflected an increase in government social benefits to persons as payments were made to individuals from federal economic recovery programs in response to the COVID-19 pandemic," the BEA noted in its release.

On the other hand, personal consumption expenditures (PCE), which describes household spending, fell by $1.89 trillion, or 13.6 percent. Personal outlays, which encompasses all personal spending, including household spending, as well as spending on services, interest payments, and mortgages, fell by $1.91 trillion in April.

This week, we can expect:
  • Monday - Construction spending for May from the Census Bureau and Department of Housing and Urban Development.
  • Tuesday - Car and truck sales for May from the auto manufacturers.
  • Wednesday - Factory orders for April from the Census Bureau.
  • Thursday - Initial jobless claims for last week from the Employment and Training Administration; the trade deficit for April from the Census Bureau.
  • Friday - Payrolls, unemployment and hourly earnings for May from the Bureau of Labor Statistics; consumer credit for April from the Federal Reserve.