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Report from
North America
Economic growth lagged in the third quarter, but
hopeful signs for the year
The US economy grew at a disappointing 2% annual rate
in the third quarter as the delta variant of the coronavirus
peaked, but promising signs suggest 2021 is on track to
notch the fastest full-year growth in almost four decades.
The coronavirus tore through unvaccinated communities
during much of the July-September period measured in the
gross domestic product report, eviscerating economists¡¯
expectations from earlier in the year of continued rapid
growth near the 6.3% and 6.7% seen in the first two
quarters of 2021.
The White House, lawmakers and economists are debating
whether the weak GDP report reflects a blip on the way to
a boom, or something more. Much will depend on the path
of the virus, and whether higher prices, persistent supplychain
issues and a wobbly job market dampen consumer
spending going into the holiday season.
See:
https://www.bea.gov/data/gdp/gross-domestic-product
Welcome rebound in jobs
Jobsrecovery gathered some steam in October as US.
employers added 531,000 positions in October. The
unemployment rate fell to 4.6%, the lowest level since the
economic recovery started in May 2020. The number of
jobs added in October easily outpaced economists'
prediction of 450,000 jobs.
The US economy gained jobs across the board, with
leisure and hospitality, manufacturing, and transportation
and warehousing leading the job gains. October's jobs
report marks a turning point after two months of sluggish
job gains, slowed by rising coronavirus cases as the Delta
variant raged across the globe.
The nation has come a long way since the height of the
pandemic. More than 18 million jobs have been added
back since the recovery started, still leaving America short
4.2 million jobs compared with February 2020. And the
late summer months weren't quite as bad as initially
reported. The U.S. Department of Labor revised August
and September's reports higher by a combined 235,000
jobs.
In the most recent four months with revisions, June
through September, the U.S. Bureau of Labor Statistics
(BLS) reported it underestimated job growth by a
cumulative 626,000 jobs ¡ª that¡¯s the largest
underestimate of any other comparable period, going back
to 1979.
See: https://www.bls.gov/ces/
Consumer sentiment plunges to 10-year low
US consumer sentiment plunged in early November to the
lowest level in a decade as surging inflation cut into
households' living standards, with few believing
policymakers are taking sufficient steps to mitigate the
issue, a widely followed survey published on Friday
showed.
The University of Michigan's Consumer Sentiment Index
plunged to 66.8 in its preliminary November reading from
October's final reading of 71.7. That was the lowest level
since November 2011.
The reactions of consumers to surging inflation should be
no surprise, as it has been reported during the past several
months. Consumers are also showing stark partisan
differences in how they view the economy with members
of the current president¡¯s party being more positive and
those of the opposition party being more negative.
See:
http://www.sca.isr.umich.edu/
Manufacturing growth slowed in October amid supply
chain issues
Manufacturing growth slowed in October amid growing
headaches from supply chain bottlenecks and labour
shortages. The Institute for Supply Management, a trade
group of purchasing managers, said Monday that its index
of manufacturing activity dipped slightly to a reading of
60.8% in October, 0.3% below September¡¯s 61.1%.
Any reading above 50 indicates growth in the
manufacturing sector. But the ISM report noted that
manufacturers and suppliers were dealing with an
unprecedented number of hurdles in their efforts to meet
rising demand. Of the 18 industries surveyed, Wood
Products was one of only two industries reporting a
decline in October compared to September.
See:https://www.ismworld.org/supply-management-news-andreports/reports/ism-report-on-business/pmi/october/
Pace of home building drops again
The pace of homebuilding fell in October as activity
remained constrained by shortages of materials as well as
scarce land and labour. Housing starts slipped 0.7% to a
seasonally adjusted annual rate of 1.520 million units last
month according to Department of Commerce. However,
permits for new-builds increased 4% to a rate of 1.650
million units in October.
Hurricane Ida, which struck in late August, caused
unprecedented flooding and depressed homebuilding in
the Northeast and the densely populated South in
September. Aside from the weather, homebuilding has
essentially been treading water as builders battle shortages
and higher prices of raw materials.
Starts have declined from the 1.725 million units in
March, which was more than a 14-year high. Still,
homesales are held back by a severe shortage of
previously owned homes on the market which has resulted
in record house price increases. There is a huge backlog of
houses authorised for construction but not yet started.
A survey from the National Association of Home Builders
showed confidence among single-family homebuilders
rose for the third straight month in November, but noted
that ¡°supply-side challenges, including building material
bottlenecks and lot and labor shortages, remain stubbornly
persistent.¡± The materials squeeze could ease during
winter, a typically slow season for homebuilding in the
Northeast and Midwest.
Softwood lumber remains expensive and copper prices,
another essential material in homebuilding, are high. In
addition, there were about 333,000 job openings in the
construction industry as of the end of September, and
according to the NAHB, availability of land for building is
at multi-decade lows.
Existing-home sales inched up in October
Sales of previously owned homes in October rose 0.8% to
a seasonally adjusted annualised rate of 6.34 million units
according to the National Association of Realtors. While
sales were 5.8% lower than October 2020, October of last
year was the cyclical high in the market. Realtors are now
predicting full-year sales of over 6 million, which would
be the highest number of sales since 2006.
"Sales remain very strong and I would attribute that to
continuing job additions," said Lawrence Yun, chief
economist for the Realtors. Yun also pointed to an
increase in investors in the market, likely driven by
soaring rents for single-family homes. Investors made up
17% of October buyers, up from 13% in September and
14% in October of 2020.
First-time buyers represented 29% of sales compared with
32% a year ago. Historically that share is around 40%.
The supply of existing homes for sale continued to
weaken. There were 1.25 million homes available for sale
at the end of October, which is 12% lower compared with
a year ago. Buyers in October did not get a break from
mortgage rates. They rose steadily from the start of August
through September.
Existing-home sales in the Northeast fell 2.6% in October,
registering an annual rate of 750,000, a 13.8% decline
from October 2020. Existing-home sales in the Midwest
rose 4.2% to an annual rate of 1.5 million in October, a
6.3% decrease from a year ago. Existing-home sales in the
South increased 0.4% in October, posting an annual rate of
2.78 million, a 3.5% drop from one year ago. And
existing-home sales in the West neither rose nor fell from
the prior month's level, registering an annual rate of 1.3
million in October, down 5.1% from one year ago.
See:
https://www.nar.realtor/newsroom/existing-home-salesinch-up-0-8-in-october
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