Personal income grew 0.3% in May, the Commerce Department's Bureau of Economic Analysis (BEA) reported today. Personal consumption expenditures slipped 0.1% after rising 0.6% in April.
Home sales continued at a record or near-record pace in May. On Thursday the government reported that new single-family houses sold at the highest seasonally adjusted annual rate (SAAR) ever, 1.03 million. That was 16% above the May 2001 total and 8% higher than the April 2002 figure, which itself was revised sharply upward from the initial estimate. Census also reported that the number of new houses for sale at the end of May was only 3.8 times the current sales rate, a level low enough to induce considerably more construction.
On Wednesday the National Assn. of Realtors (NAR) reported that existing-home sales "were essentially unchanged in May and remain at historically high levels". The SAAR was the fourth highest ever at 5.75 million, just 0.3% below April's level and 6.5% above the May 2001 mark. The median sales price in May was $154,600, up 6.6% from May 2001. That increase suggests home values are generally rising faster than inflation, adding to owners' real wealth. Such an increase may be especially important for buttressing consumer confidence at a time when stock prices are sharply down.
Commercial construction is not faring as well, according to NAR (www.realtor.org/PublicAffairsWeb.nsf/Pages/1stQtrCommercialMartket?OpenDocument) Realtors President Martin Edwards Jr., a commercial broker, said last week, "Right now, construction is increasing at a faster rate and boosting the supply of available space, so tenants in many areas will probably have some negotiating leverage this year. Rising demand for space and declines in construction in 2003 should strengthen occupancy and rents in most markets next year."
Another indicator of weakening in construction was contained in Thursday's Bureau of Labor Statistics release on mass layoff events (50+ employees at one site) in May. Construction industry events jumped to 165 from 105 in April and 109 in May 2001. The number of workers involved rose to 13,500 from 9,100 in April and 10,600 in May 2001. In each case, these were larger percentage increases than for all employers and workers, although those figures also increased.
The Census Bureau reported Wednesday that durable goods orders, excluding semiconductors, rose 0.6% in May, following a revised increase of 0.4% in April. Inventories fell for the 16th straight month, by 0.6% in May, compared to 0.5% in April. A new BLS report, Highlights of Women's Earnings in 2001, showed employment by gender and detailed occupation (http://www.bls.gov/cps/cpswom2001.pdf). Women made up 94,000 of the 4.5 million workers in assorted construction trades; 5,000 of the 231,000 operating engineers; 3,000 of the 83,000 construction trades helpers; and 4,000 of the 54,000 construction inspectors. The report also shows median weekly earnings, with earnings by gender for certain occupations.
On Wednesday the Federal Reserve's Federal Open Market Committee decided to keep its target for the federal funds rate unchanged at 1.75%. The FOMC said, "The information that has become available since the last meeting of the Committee confirms that economic activity is continuing to increase. However, both the upward impetus from the swing in inventory investment and the growth in final demand appear to have moderated. The Committee expects the rate of increase of final demand to pick up over coming quarters, supported in part by robust underlying growth in productivity, but the degree of the strengthening remains uncertain."
BEA recently posted "illustrative" 2001 estimates of gross domestic product (GDP) by industry group as a percentage of total GDP (www.bea.doc.gov/bea/ARTICLES/2002/06June/0602GDPbyIndy.pdf). Construction accounted for 4.8% of GDP in 2001, up slightly from 4.7% in 2000. Construction remained strong in 2001 as manufacturing and transportation's shares dropped. That result has been reversed so far in 2002; in yesterday's final estimate for first-quarter GDP, BEA said real (inflation-adjusted) GDP grew 6.1% (up from an earlier estimate of 5.6%) but investment in nonresidential structures fell 23%.
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