(The Center Square) – Retail sales surpassed expectations, rising 1.0% in July, and were up 2.7% from a year ago. Both initial and continuing unemployment claims fell again, indicating a resilient labor market. While this is good news, the significant decline in construction spending and housing starts may have reignited growth concerns.

Historically, housing starts have been an excellent predictor of changes in economic activity and business cycles. According to the U.S. Census Bureau, housing starts fell 6.8% in July and were 16% below last year’s level. Following the latest housing starts data, the Federal Reserve Bank of Atlanta’s nowcast of third-quarter real gross private domestic investment growth dropped from 0.0% to -2.4%. Residential investment tends to contribute most to economic weakness before recessions.