In September, U.S. sales of new single-family homes were ridiculously low, at only 307,000 units (seasonally adjusted and annualized), according to a joint press release issued by the Census Bureau and the Department of Housing and Urban Development. The U.S. homes market is still clearly struggling. Nevertheless, there is some good news to be derived from the latest data set.
New home sales have apparently settled on a floor value. They have been consistently near 300,000 units for the past five months. They were generally flat in 2009 as well, but at a slightly higher level. Prior to that, from 2006 through 2008, they fell steadily and dramatically.
The number of unsold new single-family homes has fallen to 204,000 units. Dividing the figure for unsold homes by the current monthly sales rate yields a number-of-months inventory of 8.0. The 8.0 months stockpile lies about halfway between where it was at its worst (12.1 in January 2009) and where it should be (4.0) if the market were functioning smoothly and efficiently.
The number-of-months inventory was correcting nicely (down to 6.1) through April of this year. Once the first-time homebuyer tax credit expired, however, there was a sharp unpleasant correction, back to over 9.0. It is good to see that gradual improvement is being restored again.
The latest initial jobless claims report from the Department of Labor (Employment and Training Administration division) also provides a dose of optimism. First-time jobless claims in the week ending Oct. 23 were 434,000; this was a drop of 21,000 from the week before. The level has been lower only one other time since before the recession, in early July at 427,000.
The benchmark figure for unemployment insurance filings is 500,000. A figure below half a million usually indicates more people are being newly hired than just released. The number has been trending down in fits and starts since it last maxed out at 504,000 in mid August. This is encouraging with respect to overall employment, particularly as provided by the private sector.
At the state level, the largest declines occurred in California (-13,701), North Carolina (-6,607), New York (-6,382), Pennsylvania (-5,248) and Texas (-4,385). Three of the four largest states in the nation, by population, experienced significant improvement; the exception was Florida.
Canada isn’t being left out in the better-news department either. Average weekly earnings of non-farm payroll employees increased 4.4% year over year in August, according to Statistics Canada. The last time the rate of increase exceeded 4.0% was in February 2008. Year-over-year earnings have been noticeably improving since October 2009, when they bottomed out at +1.0%.
There were double-digit percentage gains in three industries: mining, quarrying and oil and gas extraction (+17.1%); forestry and logging (+10.4%); and administrative and support services (+10.2%). Manufacturing (+6.5%) recorded a higher gain than construction (+3.8%)
Many factors can influence average weekly earnings, including changes in wage levels, number of employees in the industry, number of hours worked, overtime and the full-time versus part-time mix. The evident improvement in average weekly earnings means consumers have higher incomes to draw on when making purchases. Consumer spending is 55% of Canadian GDP.
10/28/2010 by Alex Carrick, RCD Chief Economist