Economic Snapshot: Builder confidence reaches highest level since 2005

This week we take a look at the state of confidence and optimism for homebuilders and small businesses, both of which look wildly different from one another for the month.

Housing market index

Builder confidence in July rose to a level of 60, the highest level for the Housing Market Index since November 2005. The June HMI was upwardly revised one point to 60 as well.

Two of the three HMI components posted gains in July. The component gauging current sales conditions increased one point to 66. The index charting sales expectations in the next six months rose two points to 71.

The component measuring buyer traffic dropped one point to 43.

The West and the Northeast each rose three points in July, to 60 and 47, respectively. The South and the Midwest each posted one-points gains to 61 and 55, respectively.

Small business optimism

The NFIB Small Business Optimism Index dropped 4.2 points this month to 94.1. Nine of the ten components declined this month and one remained unchanged.

After five months of job creation, small businesses halted employment additions in June, adding a net negative 0.01 workers per firm. Ten percent reported increasing employment an average of 3.2 workers per firm while 12 percent reported reducing employment an average of 3.3 workers per firm.

Fifty-two percent reported hiring or trying to hire, down three points from May, but 44 percent reported few or no qualified applicants for the positions they were trying to fill. Nine percent plan to create new jobs, down three points and the lowest reading since September 2014.

Earnings trends posted a 10 point decline, reversing last month’s improvement. A net negative 17 percent reported higher earnings. Reports of increased labor compensation fell four points to a net 21 percent of all owners, seasonally adjusted. A seasonally adjusted 11 percent plan to raise compensation in the coming months, down three points and the lowest reading since October 2013.

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