The U.S. Department of Labor revealed last week that the nation’s employers added 138,000 new jobs in May. Also, the unemployment rate fell to 4.3 percent, a rate not seen in nearly 17 years. The unemployment rate drop, however, was due to a reduction in the labor force, which fell by 429,000 persons.
Along with this modest gain in U.S. employment, employment at remodeling companies fell in April to 333,100 workers. It’s a loss of 2,500 employees for the month, bringing the two-month loss to 5,700 workers.
The sharp improvement in homeowners’ spending on remodeling, which reached a record of $195 billion in March, slowed in April. Total spending fell by nearly 3 percent to just under $190 billion. This decline follows six consecutive months of increases in spending by homeowners for remodeling their homes.
A month’s decline in economic data does not necessarily signal a trend. However, the drop in spending combined with the two-month decline in employment referred to above may suggest a weakness in the market.
Residential remodeling is not the only construction sector that contracted in April. There were spending cutbacks in virtually all types of buildings — both residential and nonresidential.
On the residential front, we noted last week that new construction fell in April due to fewer multifamily units started in the month. On the nonresidential side, the overall decline was 0.7 percent for the month. The only positive spot was office buildings, which saw a 1.7 percent gain in spending. All other types of nonresidential buildings, such as hotels or health facilities, fell for the month.
Mortgage rates remain favorable toward borrowing for the purchase or remodeling of a home. The chart below shows that the 30-year fixed mortgage rate fell last week to 3.94 percent, a drop of one basis point (i.e., one-hundredth of a percentage point).
In other economic news, we learned last week that the nation’s deficit in “goods and services” trading with other countries rose to $47.6 billion for the month. This is $2.3 billion higher than the previous month.
The chart below displays the trend for imports and exports over the last year. Both have increased over this period, although imports have risen much faster. The $191 billion in exports in April was 5 percent higher than it was in April 2016. But imports rose 8.3 percent in the same period, to $238.6 billion.
The gap between the two lines in the chart reflects the trade deficit, which has been widening over the period.
A point that is usually ignored in discussions of foreign trade is the question of what happens to the difference. A trade deficit means that we are sending out more dollars (via our spending on imports) than we are receiving from exports. Foreigners will in turn take those dollars and invest them back in the U.S. — either directly by acquiring U.S. businesses or indirectly by acquiring private or government debt.
Visit the NKBA website to view the latest economic and industry research available to NKBA members.
Manuel Gutierrez, consulting economist to NKBA, economist@nkba.org
Explanation of NKBA’s Economic Indicators Dashboard
The dashboard displays the latest value of each economic indicator. Note that all the data, except for “mortgage rate” and “appliance store sales” are seasonally adjusted and are represented at annual rates.
Remodeling Expenditures. This is the amount of money spent on home improvement projects during the month in question. It covers all work done for privately-owned homes (excludes rentals, etc.). The data are in billions of dollars and are issued monthly by the U.S. Department of Commerce.
Single Family Starts. It is the number of single family houses for which construction was started in the given month. The data are in thousands of houses and are issued monthly by the U.S. Department of Commerce.
Existing Home Sales. These data are issued monthly by the National Association of Realtors, and capture the number of existing homes that were sold in the previous month.
High-End Home Sales. This series represents sales of new homes priced at $750,000 and over. The data are released quarterly by the U.S. Department of Commerce, and are not seasonally adjusted. Thus, a valid comparison is made to the same quarter of prior year.
Mortgage Rate. We have chosen the rate on 30-year conventional loans that is issued by the Federal Home Loan Mortgage Corporation (known popularly as Freddie Mac.) Although there are a large number of mortgage instruments available to consumers, this one is still the most commonly used.
Employees in Residential Remodeling. This indicator denotes the number of individuals employed in construction firms that do mostly residential remodeling work.
Building Materials Sales. These data, released monthly by the Department of Commerce, capture the total sales of building materials, regardless of whether consumers or contractors purchased them. However, we should caution that the data also include sales to projects other than residential houses.
Appliance Store Sales. This driver captures the monthly sales of stores that sell mostly household appliances; the data are stated at an annual rate. We should not confuse this driver with total appliance sales, since they are sold by other types of stores such as Home Centers.
We hope that you find this dashboard useful as a general guide to the state of our industry. Please contact us if you would like to see further detail.
