October unemployment was 3.7%, the lowest level in the 2000’s era. Yet, overall participation rate continues to hover around 63%. Labor supply problems continue and 18% of prime aged workers (ages 25-54), nearly 23 million, are still not entering the work force.
Construction unemployment is still at low rate of 3.6% despite the housing market starting to lose some strength. Labor challenges continue to plague the construction industry and will persist through the near term as the mix of labor available does meet with the mix of labor needed.
Our outlook is for durable sectors to slow their rates of growth as housing weakens, supply factors continue to drag on growth and pricing pressures hold back potential.
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Unemployment is back to 3.6% in October, its lowest rate in the 2000’s. Pricing issues for new and existing homes, as well as upward pressures on inputs and labor start to increase their drag on growth. 2018 will finish well above 2017, but the double whammy of increasing rates and inflation will keep the trajectory lower in 2019. As such, we are projecting the construction unemployment rate to climb above 4% in first half of 2019.
Despite booming job sectors, civilian participation rate hovers around 63%. Nearly 24 million workers between the ages of 25 to 54 are out of the labor force. This is having a significant drain on economic output and our forecasts for 2019 show this rate will continue to hover at or slightly below 63%.
All signs indicate FED will decide to raise federal funds rate by 25 basis points in their December FOMC meeting. Inflationary pressures are significant throughout sectors of the economy and these are probably enough to drive the FED to a rate increase.
Going into the December 19th FOMC meeting, we are placing a very high probability (75%+) that the FED will raise rates again. The ripple effect through to the sectors of housing and durable goods manufacturers will lead to further weakening.
Builder sentiment is weakening as they continue to face several headwinds, particularly increasing input prices and a FED forced to increase rates. Preliminary projections for November show a dramatic drop in builder sentiment as these forces are raising pessimism that the strong growth will continue into 2019. Despite the weakening sentiment, the index is still well above where it has been prior to 2016. Consumer sentiment is still high, hovering just below 100. Consumer sentiment is not increasing but the good news is the index is higher than it has been since early in the first half of the year 2000.
*Note, our chart only reflects the revised months’ data. The November preliminary HMI figure is 60.