{"id":258,"date":"2014-07-17T10:19:45","date_gmt":"2014-07-17T14:19:45","guid":{"rendered":"http:\/\/naroffeconomics.com\/?p=258"},"modified":"2014-07-17T10:19:45","modified_gmt":"2014-07-17T14:19:45","slug":"june-housing-starts-and-weekly-jobless-claims","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=258","title":{"rendered":"June Housing Starts and Weekly Jobless Claims"},"content":{"rendered":"

KEY DATA:<\/strong> Starts: -9.3%; 1-Family: -9%; Permits: -4.2%\/Claims: 302,000 (down 3,000)<\/p>\n

IN A NUTSHELL:<\/strong>\u00c2\u00a0\u00c2\u00a0\u00e2\u20ac\u0153We thought that home construction would surge this spring but instead it has fizzled, despite improving labor market conditions.\u00e2\u20ac\u009d<\/em><\/strong><\/p>\n

WHAT IT MEANS:<\/strong>\u00c2\u00a0I know this will probably date me but does anyone remember the Vanguard rockets that were supposed to launch our satellites into space?\u00c2\u00a0 No?\u00c2\u00a0 Not surprising, since most of them went up and the fell back right to earth.\u00c2\u00a0 Well, the home construction sector, which was supposed to rocket us into stronger growth looks more like a Vanguard than the Atlas V that successfully sent our men to the moon.\u00c2\u00a0 Yes, I miss the space program. Housing starts posted a second consecutive big decline in June. <\/em><\/strong>\u00c2\u00a0After rebounding sharply in April from the winter weather, builders seem to be getting more cautious.\u00c2\u00a0 This is a real surprise.\u00c2\u00a0 <\/em><\/strong>First of all, permits, while down in June as well, have been running about five percent above starts for the last two months.\u00c2\u00a0 Builders are not paying for permits unless they expect to build those units.\u00c2\u00a0 The number of homes authorized but not started also jumped.\u00c2\u00a0 <\/em><\/strong>And finally, builder confidence soared in June<\/em><\/strong>, according to the National Association of Home Builders.\u00c2\u00a0 So what is going on?\u00c2\u00a0 I am not certain but the nearly thirty percent decline in starts in the South has to be suspect.<\/em><\/strong>\u00c2\u00a0 I could understand it if there was just a huge decline in the volatile multi-family sector, but the single-family component also dropped sharply.\u00c2\u00a0 In the rest of the country, activity was up<\/em><\/strong>.\u00c2\u00a0 So let\u00e2\u20ac\u2122s wait a while before we jump to any conclusions about the state of the housing market.<\/p>\n

The good news today was the drop in jobless claims.\u00c2\u00a0 We are looking at levels not seen since 2007 and when you adjust for the size of the labor force, we are approaching record lows.<\/em><\/strong>\u00c2\u00a0 The monthly surge in the number of jobs being created and the continuous drop in the unemployment rate is no fluke.\u00c2\u00a0 The July jobs report is setting up to be another really good one.<\/em><\/strong><\/p>\n

MARKETS AND FED POLICY IMPLICATIONS:<\/strong> Home construction is a critical component of any strong economy and right now, activity seems to be faltering.<\/em><\/strong>\u00c2\u00a0 But I just don\u00e2\u20ac\u2122t believe that the headline number is telling the whole story.\u00c2\u00a0 The huge fall off in the South makes no sense, especially given that starts rose everywhere else and other indicators point to rising activity.\u00c2\u00a0 So my suggestion is that we feel disappointed by the report but don\u00e2\u20ac\u2122t get too worked up about it.\u00c2\u00a0 What I think investors should focus on is the jobless claims data.\u00c2\u00a0 The labor market is tightening.\u00c2\u00a0 <\/em><\/strong>Firms are not cutting workers and people are finding jobs.\u00c2\u00a0 Don\u00e2\u20ac\u2122t be surprised if the unemployment rate dips below 6% by the fall and with full employment at around 5.5%, it is hard to believe that labor shortages will not start appearing across industries, occupations and regions.\u00c2\u00a0 <\/em><\/strong>The real question is: When will businesses feel compelled to raise wages to attract workers?\u00c2\u00a0 I have said this before and I will keep saying it, that time is coming, likely before the end of the year, and once the wage dam breaks, retention issues will arise and compensation costs will become the main topic of discussion at the Fed.\u00c2\u00a0 But Fed Chair Yellen is content to wait until she actually sees that happen so rate hikes are still well into the future.<\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: Starts: -9.3%; 1-Family: -9%; Permits: -4.2%\/Claims: 302,000 (down 3,000) IN A NUTSHELL:\u00c2\u00a0\u00c2\u00a0\u00e2\u20ac\u0153We thought that home construction would surge this spring but instead it has fizzled, despite improving labor market conditions.\u00e2\u20ac\u009d WHAT IT MEANS:\u00c2\u00a0I know this will probably date me but does anyone remember the Vanguard rockets that were supposed to launch our satellites … Continue reading June Housing Starts and Weekly Jobless Claims<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,18,24],"tags":[],"class_list":["post-258","post","type-post","status-publish","format-standard","hentry","category-economic-indicators","category-housing-starts","category-weekly-jobless-claims"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/258","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=258"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/258\/revisions"}],"predecessor-version":[{"id":259,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/258\/revisions\/259"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=258"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=258"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=258"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}