News & Events

Archive for June, 2014
 
Economic Advisor: June 23, 2014
June 25, 2014


 

First-time unemployment claims continued to decline, while consumer prices notched up. New home construction offered mixed news as permits dipped while completions posted solid gains.

Initial Jobless Claims

First-time claims for unemployment insurance filed by the newly unemployed hit a new seven-year low, according to last week’s report from the Employment and Training Administration. Initial jobless claims filed during the week ending June 14 declined to 312,000, a drop of 6,000 claims from the previous week’s revised level of 318,000 The four-week moving average, which is considered a more accurate measure of recent employment news, dipped to 311,750 claims, a decline of 3,750 claims from the prior week’s revised average of 315,500.

The news could indicate that the Bureau of Labor Statistics might report progress in its June employment report, which is due in the beginning of July.

“Through the normal ups and downs in the weekly figures, the trend in initial claims — as well as other details of the claims report — are indicative of improvement in the labor market over the past few months,” J.P. Morgan economist Daniel Silver told the Wall Street Journal last week.

Consumer Prices

Inflation in May saw its biggest gain since early 2013, with the Consumer Price Index for all Urban Consumers (CPI-U) growing by 0.4 percent for the month, the Bureau of Labor Statistics reported last week.

May’s inflation was seen largely in food and energy prices. Prices for food at home (groceries) grew 0.7 percent, which was its biggest monthly gain since 2011. Gasoline also grew, gaining 0.7 percent for the month, but it was not as high as April’s 2.3 percent gain in gas prices. In a related index, transportation services were up 1 percent, but the big energy gainer apart from gasoline prices was electricity was 2.3 percent.

Needless to say, gains in food and fuel don’t sit well with consumers and could impact spending, but the big question being discussed by analysts last week was whether or not gains in consumer prices would influence the Fed to adjust interest rates.

“We have an unemployment rate that’s been falling faster than the Fed expected, and now we’ve got an inflation rate that’s been rising more than the Fed expected,” RDQ Economics LLC chief economist John Ryding explained to the Wall Street Journal. “It raises some interesting questions for those at the Fed who’ve argued that there’s so much slack in the labor market. It really brings into question how much slack there is…”

New Real Estate

Turning to new home construction, building permits issued for private housing dipped to an annual rate of 991,000 in May, which was 6.4 percent below April and was 1.9 percent below May 2013, the Census Bureau and the Department of Housing and Urban Development reported last week. That said, permits issued for single-family homes in May notched up to a rate of 619,000, which was 3.7 percent over April.

Similar to permits, construction starts on private housing in May were at an annual rate of 1,001,000, which was 6.5 percent below April. That said, construction starts for May were 9.4 percent over May 2013. Starts on single-family homes dipped 5.9 percent from April to a rate of 625,000.

But, permits and starts are only part of the story. Completions on private housing hit an annual rate of 897,000 in May, which was a solid 6.8 percent higher than April and a whopping 24.8 percent over May 2013. Completions on single-family homes grew to a rate of 618,000, which 2.1 percent over April. Whether this will expand inventories and temper prices remains to be seen.

This week we can expect:

  • Monday — Existing home sales for May from the National Association for Realtors.
  • Tuesday — New home sales for May from the Census Bureau; and June consumer confidence The Conference Board.
  • Wednesday — May durable goods orders from the Census Bureau; third estimate for First Quarter GDP from the Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; personal incomes and spending for May from the Bureau of Economic Analysis.
  • Friday — June consumer sentiment from the University of Michigan-Thompson Reuters Survey of Consumers

Posted in Economic Advisor



Economic Advisor: June 18, 2014
June 18, 2014


 

While retail sales for May were good, they were not as high as expected, however, wholesale inventories for April could point to future gains. Meanwhile, near-term employment activity continues to indicate employers are hanging on to their workers.

Retail Sales

Retail sales for May were still up, but under-performed against market expectations. Retail and food services for the month saw a 3 percent gain, instead of the anticipated 7 percent, which put them at a total of $437.6 billion, according to last weeks report from the Census Bureau. On an annual basis, this marked a 4.3 percent increase from May 2013’s sales.

Key drivers for May’s receipts included sales for motor vehicle and parts dealers, which were up 1.4 percent; building materials and garden supplies dealers, which were up 1.1 percent; and miscellaneous retailers, which were up 1.8 percent.

Growth in retail sales is important given that it drives nearly 70 percent of the U.S. economy. Bearing that in mind, while May was not a barnstormer, it was encouraging nonetheless.

“The continued gains during the first two months of the second quarter suggests that consumers are continuing to hold their side of the bargain, building on the strong momentum at the end of the last quarter,” TD Securities deputy chief economist Millan Mulraine told the Reuters news service.

Wholesale Inventories and Sales

Wholesaler activity could point to increased retail activity in the near future. Last week the Total inventories of merchant wholesalers grew 1.1 percent to $530.6 billion in April, and were 6.7 percent higher than April 2013’s level, the Census Bureau reported last week.

Key wholesale inventory segments were inventories of durable goods, which grew by 0.9 percent in April; electrical and electronic goods, which were up 2.8; metals and minerals, except petroleum, which gained 2.5 percent; and inventories of nondurable goods, which were up 1.4 percent.

Growth in wholesaler inventories usually points to anticipation on the part of wholesalers that they will see sales growth in months to come.

Sales of merchant wholesalers saw similar growth, growing 1.3 percent in April to reach $450.2 billion. April’s activity was 7.8 percent higher than April 2013’s sales level, and put the inventory-to-sales ration at 1.18, close to April 2013’s ratio of 1.19.

Initial Jobless Claims

While the retail sales gains were less than expected, near-term employment maintained a positive trend. First-time claims for unemployment insurance filed by the newly unemployed ticked up slightly, but maintained an encouragingly low level, according to figures released last week by the Employment and Training Administration.

Initial claims for jobless benefits grew to 317,000 during the week ending June 7, a 4,000-claim increase over the previous week’s revised level of 313,000, the Administration reported. This kept first-time unemployment claims at their lowest point since the first half of 2007, before the recession. This points to increasing stability in the job market.

“The underlying trend in claims is still falling, albeit quite slowly, but the decline already recorded this year is more than enough to suggest that payroll gains of 225,000-plus ought to be sustainable,” Pantheon Macroeconomics chief economist Ian Shepherdson told the Wall Street Journal.

The four-week moving average, considered a more reliable measure of near-term employment trends, reflected a similar reality. The four-week average notched up to 315,250, a gain of 4,750 claims from the prior week’s revised average of 310,500.

This week we can expect:

  • Monday — May industrial production and capacity utilization from the Federal Reserve.
  • Tuesday — Housing starts and building permits for May from the Census Bureau; consumer price index for May from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for May from The Conference Board.

Posted in Economic Advisor



Economic Advisor: June 11, 2014
June 11, 2014


 

Last week enjoyed a slate of optimistic economic headlines with unemployment, initial jobless claims and consumer credit all performing better than expected.

Unemployment

Last week saw encouraging news on the employment front, with the U.S. economy adding 217,000 jobs in May, slightly higher than the 215,000 additional jobs economists had expected. This kept the unemployment rate steady at a nearly six-year low of 6.3 percent, with 9.8 million Americans unemployed.

May marked the fourth consecutive monthly gain of 200,000 or more jobs. That steady improvement enjoyed by the U.S. job market was notable, according to Ron Sanchez, executive vice president and chief investment officer at Fiduciary Trust.

“That is the first time that we have seen four consecutive months of 200,000 or more since October of 1999,” Sanchez told Forbes. “For a number that has a high degree of variability, this is notable for its stability. And markets always like to see a true trend, and this would appear to be a well-entrenched trend.”

Still, the job market is not out of the woods. The number of people unemployed for 27 weeks or longer in May was unchanged at 3.4 million, and comprised 34.6 percent of unemployed workers in May. The number of Americans involuntarily employed part-time because their hours had been cut or because that was the only work they could find was also unchanged at 7.3 million people.

The labor force participation rate, which measures the number of working age Americans who are either employed or looking for work, was unchanged in May, at 62.8 percent, well below the pre-recession high of 66 percent.

Initial Jobless Claims

Turning to more recent employment figures, first-time claims filed for unemployment insurance by the newly unemployed were up, but were still hovering around a seven-year low, according to last week’s report from the Employment and Training Administration.

Initial jobless claims filed during May grew 312,000, an 8,000-claim gain over the previous week’s revised total of increase 304,000, the Administration reported. This was the lowest total of new jobless claims since June 2, 2007’s total of 307,500. The four-week moving average, which is considered a more stable measure of new jobless claims, notched down by 2,250 claims to 310,250.

The news was welcome, and pointed to continued economic growth, according to many experts, but many cautioned that while a drop in new jobless claims is good, they are one piece of a larger employment puzzle.

“We need to see continued job growth,” Kathleen Bostjancic, Oxford Economics USA Inc.’s director of U.S. macro investor services, told the Bloomberg news service. “Rising wage growth is one of the missing keys here for the U.S. economy.”

Consumer Credit

Consumer borrowing benefited from bigger-than-unexpected gains in April with an equally unexpected increase credit card spending. Overall, consumer credit grew by a whopping 10.2 percent, reaching $3.17 trillion, according to last week’s release from the Federal Reserve. April’s $26.85-billion gain over March was considerably larger than the $15 billion analysts had predicted.

Adding to the encouragement was the fact that credit card spending fueled April’s growth. Revolving debt, such as credit card spending, grew by a massive 12.3 percent, to reach $870.4 billion. Revolving debt, such as student and car loans, also enjoyed considerable growth, expanding 9.2 percent to reach $2.3 trillion.

However, April’s credit card spending is critical as it indicates an increased willingness on the part of consumers to buy. Besides hinting at increased consumer confidence in at least near-term economic prospects, that consumer spending drives roughly two-thirds of the U.S. economy.

This week we can expect:

  • Tuesday — April wholesale inventories from the Census Bureau.
  • Wednesday — May Treasury budget from the Treasury Department.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; April business inventories and May retail sales totals from the Census Bureau; May import and export prices from the Census Bureau and Bureau of Economic Analysis.
  • Friday — May producer price index from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: June 4, 2014
June 4, 2014


 

Last week saw incomes increase, while spending posted an unexpected drop, and jobless claims enjoyed a better-than-expected drop, but a drop in the first quarter’s GDP kept optimism in check.

Incomes and Spending

Consumer spending for April threw the experts for a loop when it posted the first monthly loss in a year. Personal income increased $43.7 billion, or 0.3 percent in April, and disposable personal income (DPI; income after taxes) increased $44.6 billion, or 0.3 percent, the Bureau of Economic Analysis reported last week.

Economists had expected personal consumption expenditures (PCE) growth to slow from 1 percent growth in March to 0.2 percent, but April PCE actually decreased $8.1 billion, or 0.1 percent.

Ultimately, April’s performance boils down to consumers needing more income growth, according to Stephen Stanley, chief economist at Pierpont Securities LLC, who predicted the decline according to Bloomberg.

“The risk at this point is that the consumer is falling back into a pattern of mediocre spending growth,” Stanley told Bloomberg last week. “You need to see more wage growth.”

While Americans spent less in April, they’ve saved more. Personal saving, which is DPI less personal outlays (which includes PCE as well as interest and transfer payments) hit $518.1 billion in April, compared to $464.4 billion in March. The personal saving rate — personal saving as a percentage of DPI — grew to 4 percent in April over 3.6 percent in March.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed enjoyed a bigger drop than employment watchers had expected, according to last week’s news from the Employment and Training Administration. While the market had expected initial jobless claims to drop to 318,000 claims, they actually fell to 300,000, a decline of 27,000 claims from the previous week’s revised level of 327,000.

Turning to the four-week moving average, which is considered a more reliable near-term employment statistic because it is less volatile, last week posted a solid 11,250-claim drop to 311,500, a decrease of 11,250 from the previous week’s revised average. This was the lowest level for this average since 311,250 claims in Aug. 11, 2007.

GDP

While incomes were up and near-term employment offered encouraging news, the economy shrank for the first time in three years during the first quarter, according to last week’s report from the Bureau of Economic Analysis. The Bureau reported that real gross domestic product, which is the output of goods and services produced by U.S. labor and property, decreased at an annual rate of 1 percent in the first quarter. Comparatively, the fourth quarter’s real GDP grew by 2.6 percent.

Many experts had expected the bad news based on the first quarter’s dominant trend: terrible weather, which negatively impacted various elements of the economy at that time.

The first quarter’s negative performance casts a shadow on projections that economists made at the outset of 2014 that the year would see 3 percent GDP growth overall. However, lest anyone succumb to too much gloom, various economists noted that current data such as last week’s reports on better-than-expected employment performance and income growth indicate the quarter’s poor performance is already in the process of being reversed.

“The U.S. recovery took a backward step in the first quarter, most likely the result of many parts of the country having been battered by extreme weather at the start of the year,” Chris Williamson, chief economist for Markit, told the Los Angeles Times. “However, current indicators suggest this was merely a temporary setback in an otherwise ongoing robust recovery, pointing to a strong rebound in the second quarter.”

This week we can expect:

  • Monday — Construction spending for April from the Census Bureau.
  • Tuesday — Car and truck sales for May from the auto makers; factory orders for April from the Census Bureau.
  • Wednesday — April trade balance data from the Census Bureau and Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Payrolls, unemployment rate, earnings and workweek for May from the Bureau of Labor Statistics; April consumer credit scores from the Federal Reserve.

Posted in Economic Advisor



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