Economical Updates April 8, 2016

All in The Details

Last week was capped off with a strong jobs report but it, like the construction spending report that same day, required more than a superficial glance. In both cases the good stuff was in the details.

The Bureau of Labor Statistics announced a net creation of 215,000 jobs in March. That was slightly more than analysts had expected, but was also on the low end of numbers released over the last few months. The unemployment rate also rose to 5% from 4.9%.

So where is the good news? Like we said, details.

The increase in the unemployment rate was mostly because of a rise in the participation rate, a measure of persons over age 16 who are working or looking for work. That number started to shrink at the turn of the century as Baby Boomers began to retire, tanked with the recession, then continued to decline as laid-off workers gave up looking for jobs. The March uptick, from 62.9% to 63.0%, was the latest in a trend that is now several months old, and means in part, that optimism is growing and some people are returning to the job hunt. 

The second piece of good news was an increase in hourly wages. After declining a tiny bit in February, wages increased by 0.3%, a small increment but still significant in a world where wages have been flat for so long.

Overall construction spending, which covers money spent in both the public and private sectors on schools, highways, hotels, office building and so forth, was unexpectedly down by 0.5% in February. Again there are good details; residential construction just kept rolling along. Spending on housing, which includes remodeling as well as new construction, rose 0.9% and new single family home construction spending was up 1.2% and is running more than 10% ahead of last year. Further, the rather disappointing construction numbers announced earlier by the Census Bureau for January were revised up, and most of the improvement came in residential construction.

To paraphrase Mark Twain's quote about an erroneous obituary, reports of the demise of refinancing proved greatly exaggerated (again) last week as refi mortgage applications jumped by 7%. One would think that few homeowners were left who could benefit from refinancing, but Black Knight Financial Services said that another 1.5 million homeowners regained equity over the last 12 months. Some of them may be seizing their first chance for lower rates but hopefully not their last. As we go to press, Freddie Mac announced that rates had dropped to their lowest point since February 2015.