1. Wide-ranging improvement in the U.S. economy is underway. There is the danger, however, that it might be brought to an abrupt end by problems on the political front. Now that the election is over, there will have to be progress in dealing with two major issues: 1) the “fiscal cliff” resulting from automatic spending cuts and tax increases; and 2) raising the debt ceiling above $16.4 trillion so that the U.S. won’t default on its loans.

2. The latest U.S. labor market report recorded a strong increase in employment, +171,000 net new jobs. The unemployment rate, however, increased to 7.9% from 7.8%. That’s not as bad as it sounds. It resulted from more “on the sidelines” people feeling confident enough in their employment prospects to begin looking for work again.

3. U.S. construction employment in October rose by 17,000. The jobless rate in the sector in the latest month was 11.4%, down significantly from 13.7% in October of 2011. The improvement in the housing sector – with the latest starts remarkably strong at 874,000 units – will see further declines in the construction jobless rate in the months ahead. 

4. U.S. manufacturing employment climbed by 13,000 in October. Auto sales have been a particular bright spot in the economy this year. Since the recession, the number of jobs in the motor vehicle sector has risen from 600,000 to nearly 800,000.

5. The latest readings on consumer confidence from the Conference Board and manufacturing activity levels (51.7%) from the Institute of Supply Management both improved.

6. Initial jobless claims have fallen back into the 350,000 range, a very positive indicator for the overall hiring situation in the U.S.

7. U.S. “real” (i.e., inflation-adjusted) third quarter GDP growth was +2.0% quarter to quarter annualized, the same as in Q1, but ahead of Q2 (+1.3%). Fourth quarter GDP may suffer on account of Hurricane Sandy. All forms of business activity were shut down for several days as the storm lashed the East Coast, with damage concentrated around New Jersey and New York City. Power to some residential districts stayed out for as long as a week.

8. Alternatively, GDP growth might not suffer at all. Clean-up and rebuilding efforts will pump large sums of money into the economy. Transportation infrastructure (subways and rail lines) will need massive repairs. Whole residential communities will be rebuilt. If Q4 suffers losses, they will be more than made up in Q1 of next year. There will also almost assuredly be long-term civil projects (e.g., levees) to ensure that damage from any future “storm of the century” will be minimized. 

9. Canada’s total employment level stayed flat in October, but that was after large gains in September (+52,000) and August (+35,000). Canadian housing starts in October dropped to 204,000 units seasonally adjusted and annualized from 224,000 in September. For the year as a whole, they’ll be about 215,000 units. In 2011, they were 194,000 units.

10. The financing crisis in Europe continues to simmer, but an agreement has just been reached to extend Greece’s deadline to reduce its debt load to 120% of GDP. It will now have until 2022 rather than the earlier target of 2020. The head of the IMF, Christine Lagarde, has expressed her dissatisfaction with this decision. Germany’s Chancellor, Angela Merkel, won’t be quick to offer additional funding help since next year she’ll be facing an electorate that’s fed up with the problems of southern-periphery Euro-zone members.

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News.