Article source: ConstructConnect

A month ago, the Employment Situation report from the Bureau of Labor Statistics (BLS) reported a U.S. total jobs-count increase during September of +263,000. Now, for the month of October, a nearly identical change in total employment has been estimated by the BLS, +261,000 jobs. (By the way, September’s figure has just been revised to +315,000.)

These are strange times indeed. The Federal Reserve isn’t being shy about its intentions. Using the blunt instrument of interest rates, it intends to bring the economy to the edge (or beyond) of recession, to put a stop to too-rapid price inflation.

So far, the impact on the U.S. labor market has been minimal. The most recent initial jobless claims number, for the week ending October 29, stayed exceptionally low at 217,000. The seasonally adjusted (SA) unemployment rate currently sits at 3.7%; the not seasonally adjusted (NSA) U rate at 3.4%. Both levels indicate a demand for workers well in excess of supply.

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Article source: ConstructConnect

North America’s major stock markets sailed through the latest October in fine fettle. October historically has been the month when some of the biggest stock market disasters have occurred. There was the infamous Crash of 1929 and Black Monday of 1987.

But this time around, it was smooth sailing. And that was despite statements by the Federal Reserve that further interest rate hikes are in the offing. In fact, today, November 2, a further 75 basis point bump in the federal funds rate is almost guaranteed (where 100 basis points = 1.00%).

The Federal Open Market Committee (FOMC) is meeting as this article is being written and it has another session scheduled this year for December 13-14. The top of the range for the federal funds rate will soon be 4.00%. The key question concerns how much further it will be lifted.

Article source: ConstructConnect

After a gloomy patch in late summer and early fall, dominated by discussion of inflation and recession, the economic and construction news is beginning to lighten a bit. The first ray of sunshine has come in the 2022 third quarter ‘advance estimate’ GDP report. Rather than retreating or standing still, Q3 ‘real’ gross domestic product advanced by +2.6% seasonally adjusted and annualized, improving nicely on the -0.6% and -1.6% performances of Q2 and Q1 respectively.

It’s also interesting to note the BEA’s upbeat revisions to the 2021 and 2020 year-over-year annual results. 2021’s gain was moved up a little to +5.9% from an earlier estimated +5.7% and 2020’s decline was reduced to -2.8%, as opposed to -3.4%. The -2.8% showing in 2020 was a remarkable achievement, given the coronavirus-generated chaos in the first half of the year. According to the revised estimate of GDP change in 2020 (at -2.8% y/y), it wasn’t much worse than the -2.6% that occurred in 2009 (see Graph 1).

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September’s Employment Situation report from the Bureau of Labor Statistics (BLS) says that the total number of jobs in the U.S. economy rose by +263,000 last month. The gain in employment of a quarter of a million jobs was the weakest showing among all the months of this year so far, but it was still a pretty decent number. It’s not the sort of figure one would expect if the economy were becoming mired in a recession. That may still happen, but it isn’t necessarily here yet.

Furthermore, the headline unemployment rate (i.e., the seasonally adjusted or SA rate) dropped back to about as low as it ever goes in the latest month, receding to 3.5% in September from 3.7% in August. In September of last year, the SA U rate was 4.7%.

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Article source: ConstructConnect

With the Federal Reserve putting on a grim face and expressing a firm resolve to keep pumping up interest rates, September was an especially bad month for share price performances in the U.S. and elsewhere.

Taking the brunt of the carnage have been high-tech stocks. The NASDAQ index, at the close of this year’s third quarter, was -34.8% from its 52-week high (in other words, down by more than a third) and -26.8% on a year-over-year basis.

But NASDAQ hasn’t been alone in sorrow. The DJI and S&P 500 have also had little to cheer about. They’re both now in ‘bear’ territory, being -22.3% and -25.6% respectively from their 52-week highs. (A ‘bear’ market is a decline of -20% or more from peak.)

The valuations of some of the world’s biggest tech companies (e.g., Netflix and PayPal) have taken deep dives. Wishing to turn away from the negative, though, pushes one question to the forefront. Are there any sectors where equity prices remain rewarding?
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Article source: ConstructConnect

There are aspects to the current inflation problem that deserve an airing.

First, while the U.S. all-items CPI-U increase, often referred to as the headline rate, is +8.3% y/y and the ‘core’ rate, which leaves out price-volatile food and energy items, is +6.3% y/y, there is another measure that isn’t nearly as extreme.

The Federal Reserve has often indicated that when it comes to assessing inflation, the measure it turns to initially is the Personal Consumption Expenditures index (PCE), less food and energy. This yardstick is currently (July) +4.6% y/y, which is significantly high, but it’s not nearly as runaway as the +8.3% y/y for CPI-U. Also, it’s only a percentage point higher than it was a year ago in July 2021 (+3.6% y/y). (By the way, the U in CPI-U stands for urban consumers.)

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In the U.S., the Federal Reserve has just raised its key policy setting interest rate, the federal funds rate, into a range from 3.00% to 3.25%. The intent is to cool inflation, which is +8.3% year over year for the Consumer Price Index (i.e., CPI-U, with U standing for urban consumers). The U.S.  ‘core’ inflation rate is +6.3%. ‘Core’ leaves out price-volatile energy and food items.

A higher interest rate regime is meant to stamp out excessive consumer spending. But it’s also known, through corresponding bumps in mortgage rates, for almost always having a detrimental effect on residential real estate demand and new home construction.

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Article source: ConstructConnect
There will be a lot riding on the hoped-for success of the U.S. manufacturing sector over the decade-plus ahead if the goals concerning carbon emission reductions by mid-century are to be met. There will need to be tremendously large investments in EV production line expansions, new EV battery plants, computer chip-making operations, and in the fabrication of all the building products that will go into renewable electricity generation, utility-sized power storage units, coast-to-coast recharging stations, new hydrogen extraction facilities, and so on.
Already, in 2022, there has been an unprecedentedly large number of mega-sized industrial projects that have been given go-aheads. One wonders to what extent the Federal Reserve’s current program of aggressive interest rate hikes will slow this work down. For a variety of reasons, as set out in the five following bullet points, perhaps not as much as one might suppose.
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Article source: ConstructConnect 

Statistics Canada’s August Labour Force Survey report was a ‘downer’. It set out a third straight month of total jobs count decline. In August, the employment step back was -40,000 jobs. In the two preceding months of July and June, the retreats were -30,000 and -43,000 respectively.

The current year’s monthly average of total jobs-count change through August has been only +19,000. Last year, for the first eight months, the comparable figure was considerably better at +57,000.

Canada’s seasonally adjusted (SA) unemployment rate has risen to 5.4% from 4.9% in July. In August a year ago, it had been 7.1%.

The not seasonally adjusted (NSA) unemployment rate now sits at 6.0%. But the NSA U rate calculated according to the same strict rules about who is truly out of work as are adopted in the U.S., remained tight. At 4.2%, it wasn’t far off America’s figure of 3.8%.

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Article source: ConstructConnect

It’s always helpful to know which U.S. cities have the hottest economies and one way to make that assessment is to look at their labor markets.

Table 1 ranks the 51 largest U.S. urban centers in two ways: (1) by year over year jobs creation, from fastest to slowest; and (2) by current unemployment rates. (For ease of presentation on social media, Table 1 is a condensed version of Table 3, which shows the results for the full set of 51 cities.)

Dallas-Ft Worth (+7.2%) is number one for y/y jobs growth, with Las Vegas (+6.3%) second, Houston (+6.1%) third, and Austin fourth (+6.0%). It’s astonishing that three cities in Texas are in the Top 4. San Antonio is well down the chart.

The ranking for unemployment rates is headed by Minneapolis-St Paul (2.0%), with Salt Lake City (2.1%), and San Jose (2.2%) close behind. But here’s a remarkable achievement. All four of Florida’s major cities are in the Top 10: Miami, Tampa, Jacksonville, and Orlando.

Also notice that two renowned West Coast high-tech centers have exceptionally low unemployment rates: San Jose (2.2%), and San Francisco (2.5%).

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