Construction Industry Forecasts

U.S. initial jobless claims in the week ending September 11 were 450,000, according to the Department of Labor (Employment and Training Administration division). The week before, they registered a similarly encouraging level of 453,000.

A figure in the mid-400,000s is good news for the economy and lowers the likelihood of a double-dip recession. A number closer to 400,000 would be even better news, but under present economic circumstances, one appreciates an improvement wherever one can find it.

There were worries a month ago when the initial jobless level shot back up to 500,000 in the middle of August, after showing improvement throughout the spring and early summer.

Half a million first-time claims for unemployment insurance is taken to be the benchmark level above which more workers are being let go than newly hired. Hence, there was the concern in mid-August that the U.S. economy might experience receding Gross Domestic Product (GDP) again in the fall.

Those fears have been put to rest for the moment. This will be good news for stock markets and for the value of the U.S. dollar. In bond markets, the reduced uncertainty about future economic prospects will reduce some of the buying pressure.

For the economy to return to a semblance of its former strength, it needs better job markets feeding into incomes, confidence and consumer spending.

An initial jobless claims figure of 450,000 is an encouraging sign that employment is picking up overall in the United States. And that provides support for consumer spending, which comprises 70% of U.S. total output.

The problems with respect to U.S. consumer spending may have been overstated in any event. “Real” (inflation-adjusted) consumption expenditures (PCE) have been at or near +2.0% on a quarter-to-quarter annualized basis in three of the last four reporting periods.

That’s not too bad. PCE at +3.0% and higher is a sign that the economy is functioning in an entirely satisfactory fashion.

A continuing problem will be reduced labor mobility, as homeowners are reluctant to sell and move while the value of their properties is either below expectations or below their outstanding mortgages.

A significant improvement in U.S. residential real estate will be the next major signpost to watch for as the struggle to restore prosperity continues.

Regionally, the largest decreases in first-time jobless claims were in Florida, New York, Michigan, Connecticut and Virginia. Those labor markets were improving.

Pennsylvania, Washington, Texas, Kansas and Kentucky accounted for the largest increases. Those were the labor markets indicating continuing distress.

Alex Carrick