It’s Friday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here every Friday. Let’s take a look at this week’s big headlines:
Unemployment Rate Dips to 7-Year Low–Despite Missing Estimates
The Labor Department announced that 223,000 new payroll jobs were created in June, which was slightly below economists’ consensus estimate of 233,000. Unfortunately, April and May payrolls were revised down by 60,000, likely due to the double accounting of temporary jobs. The labor force participation rate also declined to 62.2% in June, down from 62.5% in May. Interestingly, 432,000 people left the labor force in June, so the unemployment rate declined to 5.3% in June, down from 5.5% in May.
Also notable is that average hourly earnings slowed to a 2% annual growth pace in June, down from a 2.3% annual pace in May. This was a very weak report. First, for every single month in 2015 there have been downward revisions to the previous month’s payrolls. There clearly is a big accounting problem at the Labor Department. The other bad news is that the labor force participation rate is now at the lowest level in 38 years. Overall, the Fed now has multiple reasons to postpone any key interest rate hike, since the details of the June payroll report were so disappointing.
Consumer Confidence Report Crushes Street Expectations
The Conference Board announced that its consumer confidence index improved to a 101.4 reading in June. This surpassed economists’ expectations of 97.5. Meanwhile, May’s reading was revised lower to 94.6, down from 95.4. In June, consumers became more optimistic about the near-term future. Those who said that business conditions are “good” rose to 26.4% (from 24.7% in May), while those who said that jobs are “plentiful” increased to 21.4% (from 20.6%). This report reaffirms the results from the University of Michigan’s Consumer Sentiment Index June report. An improving labor market (including more hiring and wage growth) is boosting American consumers’ confidence, which should, in turn, boost consumer spending in the second half of the year.
Spending On Construction Project Increased in May
During the month of May, private and public spending on construction projects increased 0.8%. This outpaced economists’ expectations of a 0.3% increase. Construction spending in April was revised slightly lower to reflect a 2.1% increase (down from 2.2% previously). In May, private construction rose to the highest level since 2008.Breaking it down, private residential construction spending improved 0.3% while private non-residential construction spending jumped 1.5%. Public construction spending jumped 0.7% to a seven-month high. In the past 12 months, construction spending has jumped 8.2%; it is now at the highest level since the recession. The gains in both private and public spending indicate that businesses and the government alike are more confident about the housing recovery.
Jobless Claims Rise For A Second Week
For the week of June 27, first-time jobless claims increased to a 281,000 annual rate. This is a 10,000 increase from the prior week’s 271,000. Economists had expected a smaller increase to 273,000. The four-week moving average increased by 1,000 to 274,750. All is quiet on the jobless claims front. This measure of layoff activity has remained below 300,000, the benchmark for normal economic activity, for over four months.
Factory Goods Orders Decline
The Commerce Department reported this week that orders to U.S. factories dropped 1.0% in May due to a decrease in military and transportation equipment demand. Economists were expecting factory orders to decrease 0.7%, so this was a steeper than expected drop. Orders for durable goods fell 1.7%, while orders for nondurable goods increased 0.2%. Excluding transportation orders, factory orders increased 0.1%. This wasn’t the strongest report to finish the week on. For nine of the past 10 months, factory goods orders have fallen. They’ve fallen 6.1% since a year ago. The good news is that the recent ISM factory activity index rose to a five-month high, so there are signs of improvement elsewhere.
That’s all I have for you this week; I’ll be in touch again next week with the latest ratings updates out of Portfolio Grader.
Have a great weekend,