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Weekly Update 06/21/2024: Economic Data Shows Headwinds

  • Accenture reports solid bookings
  • Housing market declines

Home Data

According to the Commerce Department, housing starts fell 5.5% to a 1.3 million annualized rate in May. That was the slowest pace in four years. Building permits, which give a guide to future construction, fell 3.8%, also the weakest since 2020. The decline in starts and permits encompassed both multifamily (five or more units) and single-family units which were down 10.3% and 5.2%, respectively, in terms of starts. With mortgage rates still hovering around 7%, builders have been trying to offer generous incentives to boost demand.

Existing home sales fell for a third consecutive month in May to a 4.1 million annualized rate according to the National Association of Realtors (NAR) in data released this morning. That figure was inline with the median estimate in a Bloomberg survey of economists. The supply of homes rose 18.5% from the same period last year suggesting that the slowdown is more related to the demand side as affordability remains a challenge for most families. The median sales price rose 5.8% from a year ago to $419,300. NAR Chief Economist Lawrence Yun commented: “Home prices reaching new highs are creating a wider divide between those owning properties and those who wish to be first-time buyers.” To that point, first-time buyers made up 31% of purchases, down slightly from the previous month. At the current selling pace, it would take 3.7 months to clear all the homes on the market which represents the longest such duration in four years. Regardless, it is still considered a buyers’ market given that that figure is below 5.0 months which realtors consider “tight.” Most of the slowdown was concentrated in the South while the other three regions were unchanged.

Labor Market

Initial applications for unemployment fell by 5,000 to 238,000 in the week ended June 15 according to the Labor Department. That figure had reached a 10-month high the previous week. The median forecast in a survey of economists by Bloomberg called for 235,000. The four-week average, which helps smooth week-to-week fluctuations and better uncover trends, rose to 232,750, the highest level since last September. Continuing claims, a proxy for people who remain on unemployment rolls, rose for the seventh consecutive week to 1.82 million in the week ended June 8.

The labor market continues to be a conundrum. While the four-week average of initial claims has risen, that may not mark a clear sign that the economy has weakened. The same thing happened last year only for jobless claims to dip under 200,000 at the beginning of this year. And, historically speaking, these numbers are not high. In the 20 years preceding the pandemic, weekly initial applications averaged about 345,000. Yet, with the latest Jobs Openings and Labor Turnover Survey showing that the number of job openings is declining, those out of a job may find it increasingly difficult to find a new one. The summer months also have been difficult to analyze given the number of summer jobs gained and lost during the period. Consumers haven’t been spending, as evidenced by the latest retail sales data for May, which eked out a 0.1% rise from the month prior, after a downwardly revised 0.2% in April. Unless we see a significant spike in either claims or the unemployment rate, it is difficult to see the Fed lowering rates at their next meeting on July 31. Stay tuned.


Over the next few weeks, the Fed will be able to analyze more key data points. Next Wednesday, new home sales data will be released. New home sales are tabulated at the time of sale as opposed to existing home sales, which are totaled when the transaction closes, making new home sales a timelier indicator of the strength, or lack thereof, in the housing market. Also, the final first quarter GDP reading will be released. Normally, there is little adjustment in the last revision since the advance and preliminary versions have already been released. Personal consumption is expected to fall in the acceptable 2.0% annualized range during the quarter which is good enough to indicate some economic growth but not so robust to think an inflation surge is around the corner. The all-important personal consumption expenditure inflation measure will also be released next Friday. The expectation in a survey of economists by Bloomberg calls for year-over-year prices to have risen 2.6% in May on both an overall and core basis. That figure would represent an incremental slowdown in inflation and point to more progress towards the Fed’s ultimate target of 2% annual price increases. The following week is the first week in July and will include more important indicators such as ISM surveys, job openings information, durable goods orders, the most recent Federal Open Market Committee minutes and the June payroll report, which will be the last monthly job reading before the next Fed confab later that month. Trading could be volatile, especially since the markets will be closed in observance of Independence Day on Thursday, and some may stretch it into a four-day weekend meaning stuffing buys and sells into only three days. We will see!

Company Events

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