Economic News in Review Greenville SC
Here is last week’s Economic News in Review Greenville SC.
The major news last week was that the Federal Reserve made history by raising interest rates for the first time since the beginning of the so-called Great Recession. Additionally, new housing construction got a shot in the arm, while consumer prices were flat and lay-offs saw a significant drop.
The Federal Reserve ended seven years of near-zero interest rates, after announcing that its Open Market Committee voted to raise the target range for the federal funds rate by 0.25 percent to 0.5 percent, last week. The committee based its historic decision on gains in the job market, improvement in gross domestic product, and confidence that inflation will rise to what the Fed stated was its 2 percent objective.
“We believe we have seen substantial improvement in labor market conditions, and while things may be uneven across regions of the country and different industrial sectors, we see an economy that is on a path of sustainable improvement,” Federal Reserve Chairwoman Janet Yellen said in a press conference about the increase.
How the Federal Reserve will progress from here is tough to predict. It’s clear that the bank will likely increase rates again over the coming year, but the pace of those increases will likely depend on the economy’s performance. What is clear is that it is doubtful the Federal Reserve will increase rates like it did in the 2004-to-2006 period, when it increased rates 17 times.
“As we indicated in our statement, the Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate,” Yellen added.
New Home Construction
Both building permits for new homes and starts on construction of new homes enjoyed better-than-expected performance in November, according to figures released last week by the Census Bureau.
Construction permits issued to build private housing in November grew 11 percent to reach an annual rate of 1.28 million. This was 19.5 percent higher than November 2014’s rate of 1.07 million. Permits issued for construction of single-family homes grew 1.1 percent to a rate of 723,000.
Starts on construction of private housing grew 10.5 percent to hit an annual rate of 1.17 million. This was 16.5 percent higher than November 2014’s rate of 1.007 million. Starts on single-family homes grew 7.6 percent in November to hit a rate of 768,000.
Housing market analysts have fixed their attention on inventory, because an increase in the supply of homes for sale keeps prices in check, which increases sales volume.
“Demand for housing is still good,” Amherst Pierpont Securities Chief Economist Stephen Stanley told Bloomberg last week. “More people are working and they’re starting to get paid a little more too, balance sheets are very clean, and people are feeling a little better about the overall environment.”
Consumer prices remained flat in November, with no overall change from the previous month, the Bureau of Labor Statistics reported last month. The indexes for food and energy prices declined, but were balanced out by an increase in the index for all items less food and energy.
Specifically, food prices dropped 0.1 percent and energy prices fell 1.3 percent, with gasoline prices declining a notable 2.4 percent. Meanwhile, the index for all items less food and energy grew 0.2 percent, with transportation services growing 0.6 percent, medical care services gaining 0.4 percent, and services (less energy services), notching up 0.3 percent.
While November’s monthly performance might have been flat, annual pricing performance was looking optimistic. Prices for all items were up 0.5 percent from a year ago, and the index for all items less food and energy grew by a solid 2 percent over November 2014, marking that index’s biggest 12-month gain since May 2014.
“Inflation has been historically low since the Great Recession, but is now starting to pick up,” PNC Financial Services Chief Economist Stuart Hoffman told MarketWatch.
Initial Jobless Claims
First-time claims for unemployment benefits filed by the newly unemployed during the week ending December 12, fell to 271,000, a solid decrease of 11,000 claims from the preceding week’s total of 282,000, according to last week’s report from the Employment and Training Administration.
The drop in lay-offs kept initial jobless claims well below the 300,000-claim mark, which economists generally agree designates a growing job market. Additionally, regular readers of Economic Advisor might recall that the previous week’s report saw a 13,000-claim gain in initial claims. These large, weekly swings in new claims are due to the holidays seeing seasonal hires and lay-offs.
Meanwhile, the four-week moving average — which is a more stable measure of lay-offs — held nearly steady at 270,500 claims, which was a slight decrease of 250 claims from the prior week’s average of 270,750 claims.
Economic News in Review Greenville SC
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