Prices paid for goods used in residential construction increased 0.6% in May (not seasonally adjusted) according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. May marks only the fourth monthly increase in the past 12 months in the price index for residential construction inputs.

The index has declined 4.8% year-to-date (YTD), nearly four times the magnitude of the prior record for a May YTD decrease (-1.3% in 2009).  Prices paid for goods used in residential construction have fallen between January and May just three times since 2000.

Prices paid for gypsum products climbed 1.5% in May after decreasing 1.3% in April (seasonally adjusted). The price index for gypsum products has declined 0.5% over the past 12 months and is 8.3% lower than its most recent peak reached in March 2018.

Even after the monthly increase, gypsum product prices have declined 3.0% YTD.  Prices fell slightly more—3.2%–over the same period in 2019.

The 3.1% increase in softwood lumber prices is in stark contrast to the 10.8% decline in April and is the third monthly increase over the past four months.  Prices paid for softwood lumber are 2.7% below January 2020 levels but are 3.2% higher than they were in May 2019.

Nationally, prices paid for ready-mix concrete (RMC) were unchanged in May (seasonally adjusted) after decreasing 0.4% in April.

Prices in the Northeast advanced 0.3% in May, were unchanged in the South, and fell 0.5% and 1.5% in the Midwest and West regions, respectively (not seasonally adjusted).

Other changes in indexes relevant to home building and infrastructure are shown below.

Weekly initial jobless claims continued to decline in the week ending June 6 and continuing claims, which lags initial jobless claims by one week, declined to 20.9 million in the week ending May 30. The data indicate that workers are returning to work, albeit slowly, as coronavirus restrictions are gradually eased.

The U.S. Department of Labor released the Unemployment Insurance Weekly Claims Report for the week ending June 6. In the week ending June 6, the number of initial jobless claims declined by 355,000 to a seasonally adjusted level of 1,542,000, compared to the revised previous week’s claims of 1,897,000. It marks the tenth straight week of declines in initial claims since the week ending March 28 when it hit a record peak of 6.9 million. The four-week moving average decreased to 2,002,000, from a revised average of 2,288,250 in the previous week. This week’s new claims brought the twelve-week total to 44.2 million.

Meanwhile, the number for seasonally adjusted insured unemployment, known as continuing claims, declined slightly by 339,000 to a seasonally adjusted level of 20,929,000 in the week ending May 30. Now it was about 4 million less than the highest point of 24.9 million in the week ending May 9, indicating more unemployed workers are being rehired as businesses reopen. The four-week moving average was 21,987,500, a decrease of 404,750 from the previous week’s revised average. The seasonally adjusted insured unemployment rate declined by 0.2 percentage point to 14.4% for the week ending May 30. The previous week’s rate was revised down by 0.2 percentage point from 14.8% to 14.6%.

The U.S. Department of Labor also released the advanced number of actual initial claims under state programs without seasonal adjustments. The unadjusted number of advanced initial claims totaled 1,537,122 in the week ending June 6, a decrease of 82,886 from the previous week.

The chart below presents the top 10 states ranked by the number of advanced initial claims for the week ending June 6. Like the previous week, California, Georgia and Florida still reported the most advanced initial claims. California led the way with 258,060 initial claims, followed by Georgia with 134,711 initial claims and Florida with 110,520 initial claims. South Dakota, Vermont and Wyoming had the least advanced initial claims across all the states.

Compared to the previous week, California (+29,426), Massachusetts (+17,102) and New York (+12,422) reported the largest increases in advanced initial claims for the week ending June 6. Texas (-16,941), Georgia (-14,452), and Michigan (-10,786) had the largest decreases in advanced initial claims.

The latest round of the Mortgage Bankers Association’s (MBA) Weekly Application Survey showed an increase in its benchmark Market Composite Index for the week ending on June 5 by 9.3% from the previous week on a seasonally adjusted basis.

Refinancing activity, which had been showing week-to-week declines since the second week of April, showed a sharp turnaround this week and posted an 11.4% gain compared to the previous week’s activity. Home purchasing continued its climb, posting gains for the eighth straight week, increasing from the previous week by 5.3%.

This week’s purchasing activity marked the highest level since January. Meanwhile, MBA’s 30-year fixed-rate mortgage rate inched up one basis point from the record low reached last week of 3.37%. This suggests a cautionary stance among many lenders as the economy prepares for a relatively more V-shaped recovery from the COVID-19-induced slump.

As shown in the above figure, the declines in refinancing and purchasing activities’ year-over-year gains from the previous week, while nonetheless positive, are indicative of the uncertainty that the housing market faces as many businesses reopen across the nation.

In May, the unemployment rate posted a surprise decline to 13.3% and total payroll employment rose by 2.5 million as the economy partially reopened.

Residential construction employment rose by 226,000 in May to 2.7 million, partially reversing a loss of 422,000 in April. Total construction industry (both residential and nonresidential) employment rebounded to 7.0 million in May.

In the Employment Situation Summary for May, total nonfarm payroll employment increased by 2.5 million, after declines of 1.4 million in March and 20.7 million in April. The increase in May is the biggest gain on record as the economy starts to recover from the COVID-19 pandemic. Monthly job changes in March and April were revised down. The March increase was revised downward from an initial estimate of -881,000 to -1.4 million, while the April increase was revised downward by 150,000 from -20.5 million to -20.7 million. With the revisions, the economy lost 22.1 million jobs in March and April due to the impact of the COVID-19 pandemic.

After the widespread loss in all the major sectors in April, many industries sectors increase in May. Employment in leisure and hospitality, construction, education and health services, and retail trade had the largest gains in May, while government employment continued to decline sharply.

Meanwhile, the unemployment rate dropped to 13.3% in May, down from a recent high in April. In May, the number of employed persons increased by about 3.8 million, while the number of unemployed persons declined by 2.1 million to 21.0 million. Among all the unemployed persons, about 73% classified themselves as on furlough or a temporary layoff and expected to be recalled back to work. The labor force participation rate, the proportion of the population either looking for a job or already with a job, rose by 0.6 percentage point to 60.8% in May, following a decrease of 2.5 percentage points in April.

The surprise decline in the unemployment rate and dramatic job gains are very good news amid the COVID-19 pandemic, showing early signs of recovery as states start to reopen and businesses call back workers. These better than expected job situation is also a cause behind recent relative strength in housing demand.

Additionally, employment in the overall construction sector increased by 464,000 in May, after a revised decrease of 995,000 in April. The number of residential construction jobs rose by 226,000 in May, after the largest drop in April.

Residential construction employment now stands at 2.7 million in May, broken down as 783,000 builders and 2.0 million residential specialty trade contractors. The 6-month moving average of monthly job changes for residential construction is -29,100 a month, reflecting the largest job loss in April. Over the last 12 months, home builders and remodelers shed 148,400 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 764,300 positions.

In May, the unemployment rate for construction workers dropped to 15.2% on a seasonally adjusted basis, from 16.1% in April. The unemployment rate for construction workers has trended downward for the past ten years and remained at a relative low level in the beginning of 2020. The unemployment rate in April and May reflected the impact of the COVID-19 pandemic on construction industry.