Last Week's Economic News in Review

New home construction took off, and lay-offs tumbled, while retail sales experienced an unexpected dip. New Home Construction Construction on new homes enjoyed a sizable surge, growing 9.8 percent to an annual rate of 1,174,000, the Census Bureau reported last week. In comparison to June 2014, this marked a considerable 26.6 percent annual increase. The key driver in last month’s new home construction was multi-family unit ground-breakings, which increased 29.4 percent. Meanwhile, new construction on single-family homes actually shrank 0.9 percent to a rate of 685,000. “In contrast to the multi-family segment, which has been on a clear upward path for some time now, the single-family segment continues to amble along, heading higher but not with any great sense of urgency,” Regions Financial Corp. Chief Economist Richard Moody told the Wall Street Journal. Building permits issued in June for new home construction grew 7.4 percent to an annual rate of 1,343,000, which was a whopping 30 percent over June 2014 estimate of 1,033,000. Permits for single-family home construction issued in June grew 0.9 percent to a rate of 687,000. Some economists warned that permits and starts on multi-family housing could shrink in coming months, as tax incentives in some markets, especially New York, come to an end. “We have to expect a big correction in July,” Pantheon Macroeconomics Chief Economist Ian Shepherdson told the Journal. Initial Jobless Claims After seeing a surge in lay-offs a week prior, initial jobless claims experienced some good news. First-time claims for employment benefits filed by the newly laid off during the week ending July 11 fell to 281,000, a plummet of 15,000 claims from the previous week’s total of 296,000, the Employment and Training Administration reported last week. That performance kept lay-offs well within the range of what’s considered a growing job market. “The trend in claims continues to point to labor market improvement,” BNP Paribas Economist Derek Lindsey told MarketWatch. The four-week moving average, considered a more stable measure of lay-off activity, did not see large swings in either direction during the past few week’s of the Administration’s reports, including this week’s. The average ticked up slightly to 282,500 claims, a gain 3,250 claims from the preceding week’s average of 279,250. Retail Sales Retail sales continued to see volatile performance, with retail and food services sales dropping 0.3 percent to $442.0 billion in June sales, the Census Bureau reported last week. While the contraction was unwelcome, retail sales are still growing over time, with June’s performance totaling 1.4 percent higher than June 2014. “Consumer fundamentals still appear pretty favorable, particularly the vigorous gains in job creation, but household caution still appears to be holding back a more rapid pace of spending growth,” J.P. Morgan Chief U.S. Economist Michael Feroli told the Wall Street Journal. Segments that experienced sizable downturns included furniture and home stores, which experienced a 1.6 percent decline in sales; clothing and accessories sales, which saw sales drop 1.5 percent; and building material and garden stores, which dropped 1.3 percent. Some sectors that saw positive performance included sales at electronics stores, which grew 1 percent; gas station sales, which grew 0.8 percent; and sales at general merchandise stores, which grew 0.7 percent. This week we can expect: Wednesday — Existing home sales for June from the National Association of Realtors. Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for June from The Conference Board. Friday — New home sales for June from the Census Bureau.