Article source: ConstructConnect

The other day, I wrote about U.S. city labor markets. Today’s article presents the same subject matter and graphics for Canada.

Table 1 ranks 33 Census Metropolitan Areas (CMAs) in Canada according to two criteria: (1) year-over-year change in number of total jobs, fastest to slowest; and (2) unemployment rates, lowest to highest.

The Top 5 cities with both good jobs growth and low unemployment rates are shaded green. The next best tier of 5 CMAs appears with purple shading.

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Article source: ConstructConnect

Let’s jump right into a discussion of some of the more interesting numbers to have appeared in recent public and private sector data releases. Exorbitant prices charged for nearly everything is seemingly top of mind for everyone, so that’s where we’ll begin. Is there relief in sight?

(1) Inflation in both the U.S. and Canada moderated a little in July. The U.S. Consumer Price Index (CPI-U, where U stands for Urban consumers) eased back to +8.5% year over year from +9.1% in June. On a month-to-month basis, CPI-U stayed the same. In Canada, the CPI slowed to +7.6% y/y in July from +8.1% in June. Canada’s month-to-month change was +0.1%.

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Article source: ConstructConnect

Changes are happening quickly with respect to costs and prices in the economy.

This article, in tables and graphs, sets out the latest Producer Price Index (PPI) results published by the Bureau of Labor Statistics (BLS).

The figures appearing below are for June and readers should know that for some materials, especially in the energy sphere, there have been significant downward shifts over the past month and a bit. For example, the per gallon price of gasoline has recently come off its high of $5.00 and is now down around $4.00.

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Article source: ConstructConnect

It’ll be hard for anyone to find much fault with July’s Employment Situation report from the Bureau of Labor Statistics (BLS). The total number of jobs gained during the month was +528,000, which beat the previous six-month average of +461,000. Interestingly, it was just about a match for January-to-June 2021’s average of +533,000.

My concern is that the news may be too good. Will it instruct the Fed that the economy remains too hot, and is begging to be restrained by aggressive interest rate hikes beyond what are already expected? Will the Fed figure it needs to go past ‘neutrality’ (i.e., a federal funds rate of 3.50% as a ceiling) in its assault on inflation?

The most striking development is that the total U.S. jobs count has finally returned to a level approximately even with peak employment immediately prior to the onset of the pandemic.

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It seems everyone is talking about recession. Are we already in one? Should we pencil one in for 2023? Is there any possibility one can be avoided entirely? Stock market investors in North America, Europe and Japan no longer seem terribly worried.

In July, eight key indices (as set out in Table 2) cast aside their cloaks of gloom and went looking for the sun again. NASDAQ performed best (+12.3% month to month), followed by the Russell 2000 (+10.4% m/m), S&P 500 (+9.1%), STOXX Europe (+7.9%), the DJI (+6.7%), the German DAX (+5.5%), Tokyo’s Nikkei (+5.3%) and London’s FTSE (+2.5%).

More than half of Q2 earnings have now been reported and results versus estimates have been better than expected. It must be acknowledged, though, that this is partly the result of downward revisions to target estimates due to a slowing economy. U.S. ‘real’ (i.e., after inflation) GDP change in Q1 of this year was -1.6% annualized and in Q2, -0.9%.

There are two kinds of confidence that have a great deal of bearing on where economies will meander next. The first of these is consumer confidence.

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You’ll often hear that the residential real estate market will be the first among all players in the economy to signal a cyclical change (e.g., from recession to recovery or vice versa) brought on by central bank interest rate action.

This is an important topic in the context of current worries about recession due to the Federal Reserve lifting its federal funds rate from essentially zero to a range between 1.50% and 1.75% and the Bank of Canada hiking its overnight rate from 0.25% to 2.50% in four steps since early March.

By the way, it’s not always true that new and resale home markets are ultra-responsive to interest rate moves. When the federal funds rate was lowered after the financial crisis of 2008-2009, it still took years for U.S. housing starts to regain anything like their former vigor.

The key determinants of housing demand are probably captured in the word ‘affordability’, which has several components, with mortgage rates and pricing taking precedence.

The latest Primary Mortgage Market Survey (PPMS) conducted by Freddie Mac has the conventional 30-year fixed rate mortgage in the U.S. now sitting at 5.54%. The average in 2021 was 2.96%.

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Article source: ConstructConnect

In the U.S. in June, according to the latest Employment Situation report from the Bureau of Labor Statistics, jobs creation maintained a strong pace, +372,000, although it didn’t quite keep up with the average through the first five months of this year, +474,000.

The seasonally adjusted (SA) unemployment rate stayed at the 3.6% level where it has been lodged for four months in a row now.

The 3.6% U rate is extremely low. There’s much talk by analysts and in media circles about a recession being imminent, or maybe even already underway. The speculation is reasonable given the rampant price inflation that is underway, the consequent hikes in interest rates being initiated by the Fed, and the darkening mood of consumers as reflected in confidence surveys.

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Article source: ConstructConnect

Since climbing interest rates are a primary concern governing the outlook for construction activity and since the reason interest rates are being adjusted upwards by the Federal Reserve and the Bank of Canada is to slow the economy and dampen demand for many consumer goods, the topic of runaway inflation has taken on huge significance.

The rapid price inflation currently being experienced in the U.S. and Canada has roots in supply chain bottlenecks; worker shortages and exaggerated wage hikes; and the deleterious impact of the war in Ukraine on energy markets.

But there’s another cause and, like most things economic, it has a self-correcting aspect that will soon be kicking in and serving to modify the official reported year-over-year advances in the Consumer Price Index (CPI), which currently stand at +8.6% in the U.S. and +7.7% in Canada.

That self-correcting feature relates to the mathematics of the year-over-year CPI calculation and the ‘low base effect’. For many items in the CPI, the outsized percentage gains in price this year are at least partly due to the early recovery levels they’re being compared with from last year.

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Article source: ConstructConnect

The angst over whether all the talk about a possible looming recession may be affecting the U.S. jobs market can be set aside, at least temporarily, based on the latest Employment Situation report from the Bureau of Labor Statistics (BLS). May’s month-to-month change in the U.S. total jobs count was +390,000. That’s a little down from the year-to-date monthly average for 2022 of +490,000, but it’s still strikingly good.

The seasonally adjusted (SA) unemployment rate stayed at 3.6% for the third month in a row. The not seasonally adjusted (NSA) unemployment rate ticked up to 3.4% from 3.3% in April. But U rates in the mid-3.0% range are about as low as they ever go.

The construction sector achieved decent hiring success in May, with a gain in employment of +36,000 jobs. That was the second best monthly showing this year, behind only February’s +54,000.

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Article source: ConstructConnect

The graphic featured below maps ConstructConnect’s type-of-structure categories for ‘starts’ to the Census Bureau’s put-in-place designations, while also showing year-to-date results for both series through April 2022.

As the text box says, ‘starts’ lead put-in-place numbers. Therefore, it’s possible to draw inferences concerning the likely future direction to be taken by many of the put-in-place sub-categories from the starts results.

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