Discussing consumer economic expectations and small business optimism, construction jobs, South Carolina’s economy in 2018, the Fed and inflation plus much more!
Small Business Optimism Hits Near All-Time High
The NFIB just announced that their Index of Small Business Optimism hit a high we have not seen since Reagan was President!
NFIB President and CEO Juanita Duggan said:
We haven’t seen this kind of optimism in 34 years, and we’ve seen it only once in the 44 years that NFIB has been conducting this research. Small business owners are exuberant about the economy, and they are ready to lead the U.S. economy in a period of robust growth.
NFIB Chief Economist Bill Dunkelberg said:
This is the second-highest reading in the 44-year history of the Index. The NFIB indicators clearly anticipate further upticks in economic growth, perhaps pushing up toward four percent GDP growth for the fourth quarter. This is a dramatically different picture than owners presented during the weak 2009-16 recovery.
A very very good indicator for the economy! Especially since hiring plans increased in construction, manufacturing and professional services.
Check out the chart:
Construction Jobs Numbers Rebound in November
The nation’s construction sector added 24,000 net new jobs in November, representing a 0.3 percent month-over-month increase, according to an Associated Builders and Contractors (ABC) analysis of Bureau of Labor Statistics data.
They said that the construction industry unemployment rate increased by 0.5 percentage points and now stands at 5 percent. They said this increase is likely due to seasonal factors and the increase in the construction industry unemployment rate is due to the problems of finding skilled workers.
Residential building employment was up 2.5% and nonresidential building was up 3.1% in the past 12 months.
ABC Chief Economist Anirban Basu said:
Today’s employment report was quite good. The nation added 228,000 net new jobs in November, which makes it the second consecutive strong month for employment growth. Some of this performance may be attributable to interrupted hiring in August and September due to storms. However, for the most part, today’s report is consistent with long-term trends indicating strong demand for human capital and an economy poised to avert a downturn in the near term.
Indeed, the nation’s economy is humming. With consumer confidence remaining elevated and wage pressures continuing to build, there is little reason to believe that America’s consumer-led recovery is about to soften. This is good news for construction firms, particularly those that specialize in private construction.
Hopefully we will see these positive signals for the economy continue in 2018! Speaking of more construction jobs…
Construction Job Openings Rise in October
According to the BLS Job Openings and Labor Turnover Survey (JOLTS) and NAHB analysis, the number of open construction sector jobs (on a seasonally adjusted basis) increased to 227,000 in October. This count is close to the cycle high of 238,000 set in July of 2016.
The open position rate (job openings as a percent of total employment) for October increased to 3.2%. On a smoothed, twelve-month moving average basis, the open position rate for the construction sector ticked up to 2.7%.
The overall trend for open construction jobs has been increasing since the end of the Great Recession. This is consistent with survey data indicating that access to labor remains a top business challenge for builders.
It takes time to train or retrain people for the industries that are having a tough time finding qualified workers. After the housing market crashed, many construction workers either retired or moved into different fields.
SC Economy to Remain Strong in 2018
Check out the good news from University of South Carolina economists at the Darla Moore School of Business:
Despite a tight labor market and a series of Midlands-area layoffs due to the recent shutdown of construction at the V.C. Summer nuclear facility in Fairfield County, South Carolina’s economy remains strong and stable. Palmetto State residents can expect that stability to continue in 2018.
They say South Carolina should see broad-based growth continue across most industries with accompanying gains in employment and income for South Carolinians.
Market fundamentals are strong and the state’s economy is in a very good position as we head toward 2018. These market fundamentals include low unemployment, higher wage growth and stronger global demand.
The labor market in South Carolina is more favorable to workers than at any time in the last eight years. With the unemployment rate currently at 3.9 percent — the lowest level since the year 2000 — employers are having to provide stronger incentives, such as higher wages, to attract and retain the workers they need.
Once again, the manufacturing and professional and business services sectors continued to be major drivers of South Carolina’s employment growth in 2017. Construction didn’t fair as well.
After being the state’s leading industry in 2016, construction markets have tapered off in the face of rising lumber prices. The U.S. Department of Commerce imposed import tariffs on Canadian lumber beginning in late 2016, which has contributed to higher input costs for builders and reduced the overall growth rate for the industry this year.
Sad to see how the tariffs on Canadian lumber has hurt both construction employment and the number of homes being built.
They also say the unemployment rate will decrease further but this could turn into an economic bottleneck. It isn’t always about offering more pay but finding qualified workers.
Has The Fed Given Up on Inflation?
From Business Insider:
For Federal Reserve officials, the whole point of keeping interest rates low for a prolonged period was to get the US economy on a solid footing where unemployment was low and wages could begin to climb.
So with inflation still chronically below the Fed’s target and wage growth continuing to disappoint, coming in at a tepid 2.5% annual reading at last brush, why are central bank officials so keen to continue raising interest rates, as they are widely expected to do this week?
One key reason, albeit a misguided one, is the sense that Fed officials would be out of tools if another downturn were to hit the economy. That means the Fed should get rates up now in order to be able to cut them later — even if it risks slowing economic activity in the short run.
The Fed painted themselves into a corner and waited too long to do something about it. Sadly, we may be the ones to pay for their mistakes…
Strong Buyer Traffic in October 2017
According to NAR’s latest Realtor Survey, buyer traffic was stronger and supply conditions were mostly weak or stable. Check out the maps showing the conditions in each state:
Nothing really Earth shattering as regular readers of this blog know there is and has been a serious issue with limited inventory for quite some time.
This does NOT have to be an issue for you if you are looking to buy a home. You simply need to work with an experienced local Realtor and get Pre-Approved before you start looking at homes.
Anyone thinking about selling their home should be encouraged by this. Check out this chart showing buyer activity over the last couple of months compared to the Spring:
Th number of homes for sale is low and that means we are in a seller’s market. A seller’s market simply means that there aren’t adequate houses for sale to meet buyer demand.
It does NOT mean that sellers can ignore the realities of their local real estate market!
Additional inventory could be hitting the market since home building normally picks up in the Spring. Don’t wait until this other inventory comes to market before you decide to sell..
Sellers may also be surprised by how quickly homes are selling today. According to Ellie Mae’s latest Origination Insights Report, the time to close a loan has dropped to 44 days! The average days on market was only 34 days in the latest NAR Existing Home Sales Report.
So, Folks, Where Are We Going to Live?
Snippet from a must read via From a small northwestern observatory:
Prior to the “meltdown” (let’s say, 2004 – 2007), housing starts in the U.S. averaged about 1.865 million units per year. Now, few analysts disagree that this was too many, but figuring out the right number is harder than one might think. In 2008, the number dipped down to about 905,000, and hit a low of 583,000 in 2009. Since then, the annual starts have trended up. However, in 2016, we still were only at 1.207 million. Of that, only 751,000 were single family units, compared to an average of 1.4 million single family homes per year in the 2004-2007 period. Hence, nationally, we’re building about half as many homes as we were 10 years ago.
Great article from one of my long time favorite reads. We need to be thinking about household formation and the number of homes being built…
We need to think about what is a healthy and sustainable level of new home construction…
We need to think about what, if any, actions need to be taken to ensure there are affordable homes being built…
Consumers’ Economic Expectations Increase
The New York Fed’s Center for Microeconomic Data’s November 2017 Survey of Consumer Expectations shows an increase in wage growth expectations and a decline in unemployment expectations. Households’ expectations about both income and spending growth improved considerably. Expectations of year-ahead growth in government debt increased sharply.
Median inflation expectations were unchanged at both the three-year (at 2.8%), and the one-year (at 2.6%) horizons.
Median home price change expectations increased from 3.0% in October to 3.3% in November, exceeding its trailing 12-month average of 3.2%.
Median one-year ahead earnings growth expectations rebounded from 2.1% in October to 2.6% in November, back to its level from July of this year. The increase was driven by respondents with less than a college education.
Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—retreated from 36.0% in October to 33.7% in November.
Median expected household income growth increased from 2.6% in October to 3.0% in November, its second consecutive rise after its sharp drop this September and a new series’ high. The increase was broad-based across age, income and education groups.
One-year-ahead expectations of the household’s financial situation improved somewhat, with 42.2% of respondents expecting to be better off financially, compared to 40.9% in October and 37.7% a year ago.
It is good to see people feeling more confident about the economy. We will have to wait to see if this translates into more economic growth or home sales…
U.S. Economic Confidence Holds Strong
Americans’ confidence in the economy remains strong heading into the final weeks of the holiday shopping season. Gallup’s U.S. Economic Confidence Index registered +7 last week, similar to the previous week’s score of +9 and close to this year’s average of +6.
Views of current economic conditions: Last week, 39% of Americans rated current economic conditions as “excellent” or “good,” while 22% rated them as “poor.” The resulting current conditions score of +17 is just one point shy of the record high reached several times this year, most recently during Thanksgiving week.
Future expectations for the economy: Americans view the economy’s direction slightly more negatively than positively. Last week, 49% of Americans said the economy was getting worse, while 46% said it was getting better, resulting in an economic outlook score of -3. This is down slightly from the previous week’s score of +1 and just shy of the -1 average so far this year.
Another good indicator of how people feel about the economy. Let’s just hope the 49% that have negative expectations about where the economy is headed are incorrect…
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