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Economic & Housing Weekly Note

Payroll Employment Rises While Housing Data Suggest Further Strength in the Coming Months

October 2, 2020

Key Takeaways:

  • Nonfarm payroll employment rose by 661,000 in September, a deceleration from last month’s pace, according to the Bureau of Labor Statistics. By industry, job growth was concentrated in the leisure and hospitality sector, as well as in retail trade and health care and social assistance. Residential construction employment (including specialty trade contractors) rose 22,100. The number of persons working part time but who would prefer full-time employment continued to decline, falling by 1.3 million. The unemployment rate fell by 0.5 percentage points to 7.9 percent.
  • Personal income, adjusted for inflation, fell in August by 3.0 percent, according to the Bureau of Economic Analysis. Excluding transfer payments, real personal income rose 0.9 percent. Real personal consumption expenditures rose 0.7 percent, though the level remained 3.9 percent below February. The personal saving rate fell from 17.7 percent to 14.1 percent. From a year ago, the PCE price index rose 1.4 percent, an acceleration of three-tenths from July, while the core PCE price index rose 1.6 percent, an acceleration of two-tenths from July.
  • The Conference Board Consumer Confidence Index jumped 15.5 points in September to 101.8, though it remained well below the levels seen prior to the pandemic. Consumer confidence in both the present situation index and the future expectations index increased.
  • Light vehicle sales jumped 7.5 percent in September to a seasonally adjusted annualized rate of 16.4 million units, according to Autodata, the fifth consecutive month of increases. Sales are now 3.9 percent below the level seen in February .
  • The ISM Manufacturing Index fell 0.6 points in September to 55.4, the first decline since April. Any reading above 50 indicates expansion. The decline was driven by the new orders and production indices, which both fell. The employment index continued to climb, reaching the highest level since July 2019, though it remained just below the “expansionary” threshold at 49.6 .
  • The National Association of REALTORS® Pending Home Sales Index, which records contract signings of existing homes and typically leads closings by one to two months, jumped 8.8 percent in September to 132.8, a record high. Sales rose in every region. From a year ago, pending sales rose 24.2 percent.
  • Private residential construction spending rose 3.7 percent in September, according to the Census Bureau. New single-family housing spending increased 5.5 percent, the largest monthly increase since July 2009. New multifamily spending fell 0.1 percent. From a year ago, new single-family spending rose 2.2 percent, while multifamily spending rose 8.3 percent.
Forecast Impact:

Data in September showed that the economic recovery is still ongoing, though there were more signs that the pace of recovery is slowing. Job growth continued in September, though once again the pace slowed from the prior month. Total nonfarm payroll employment remains 7.0 percent below the level seen in February. August personal income declined, though this was entirely attributable to a decrease in unemployment insurance benefits. The sharp increases in both consumer confidence and light vehicle sales in September support our expectation of continued consumer spending growth over September, even if at a slower pace than earlier in the summer. Meanwhile, the increase in consumer expectations and an elevated savings rate also suggest some upside to consumer spending in the coming months. However, the fall in the ISM Manufacturing Index was a surprise, even if it remained comfortably in expansion territory. In housing, data released this week continued to show strength in the housing market, with an increase in pending sales to record levels. The increase in September private residential construction spending supports our outlook for a strong rebound in residential fixed investment in the third quarter .

Ricky Goyette
Economic and Strategic Research Group
October 2, 2020

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