What I Saw Last Week
Surprisingly, Construction Spending for November contracted by 0.3% – as opposed to my forecast for it to increase by 0.5% – as residential construction, which was expected to provide a sizable boost to overall construction spending, increased a modest 0.4% after jumping 2.3% in October. Non-residential construction spending dropped 0.7% in November. Nearly every non-residential sector posted spending declines. This included a 1.4% decline in power, a 1.3% drop in lodging, a 1.0% pullback in manufacturing, and a 0.9% drop in office.
Initial Unemployment Claims increased from an upwardly revised 362,000 for the week ending December 22 to 372,000 for the week ending December 29. I had expected the rise to be a more modest 365,000 but the revision led me to underestimate the final figure. Even though the initial claims level rose this week, the dynamics of the labor market have not shifted. Quite simply, the initial claims have remained bounded between 350,000 and 400,000 for the past several months and show no signs of breaking out of this range. Any weekly shift is just normal volatility.
U.S. Employment grew by 155,000 – a little above my forecast for 145,000 – and, as anticipated the unemployment rate remained at 7.8%. October nonfarm payrolls were revised down to 137,000 from 138,000 while November non-farm payrolls were revised up to 161,000 from 146,000. Private sector payrolls jumped by 168,000 in December, which was higher than the Briefing.com consensus estimate of 145,000. Private sector payrolls for November were revised up to 171,000 from 147,000.
The December report carried a mixed message of stable job growth that is good but not good enough to make a meaningful dent in the unemployment rate. In that vein, it was also good, but not good enough in our estimation to convince the Fed to withdraw its accommodation anytime soon.
Just an FYI – You might want to hold onto your hats when the January data is released as it will include revisions to employment to reflect annual benchmarking. It will be interesting to see what they come up with!
What to Watch for This Week
The Northwest Multiple Listing Service provides its data for December home sales in Washington State and I am anticipating that the Seattle metro area will see in excess of 3,000 sales in December. Listing activity will be well below where it needs to be but i am hopeful that this will improve this spring. Prices in 2012 for all unit types will show double digit gains over 2011.
Consumer Credit data for November will show a more modest expansion from the $14.2B seen in October. Look for growth of around $8B.
Initial Unemployment Claims remain range bound. I am expecting to see a number of around 365,000.