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Archive for March, 2015
 
Economic Advisor: March 18, 2015
March 18, 2015


 

Last week’s economic headlines showed that retail sales were up while first-time jobless claims had dropped as the winter’s frigid grasp on the economy seemed to be loosening.

Retails Sales

Retail sales for February increased 0.3 percent to $427.2 billion, and were 1.5 percent higher than last year’s sales from February 2013, the Census Bureau reported last week. February’s performance outpaced analysts’ expectations of 0.2 percent growth for the month.

“The economy seems to be rebounding from a winter-related slump,” Bank of Tokyo-Mitsubishi UFJ chief financial economist Chris Rupkey told the Reuters news service. “We expect the Fed will stay the course with its exit strategy.”

“We see this as further confirmation that the underlying momentum in the economy remains quite favorable,” added Millan Mulraine, deputy chief economist at TD Securities in New York.

Key categories that showed solid growth over January were health and personal care stores, which were up 1.2 percent; sport goods, hobbies, book and music stories, which were up 2.5 percent; and non-store retailers, which were up 1.2 percent.

Employment

First-time claims for unemployment insurance filed by the newly unemployed during the week ending March 8 hit dropped to 315,000, a decline of 9,000 from the previous week’s revised figure of 324,000, the Employment and Training Administration reported last week. This was the lowest level since November, which saw a six-month low. The four-week moving average — considered a more stable gauge of near-term employment activity — dropped to 330,500, a dip of 6,250 claims from the previous week’s revised average of 336,750.

Initial jobless claims have been volatile during the extreme winter conditions felt by most of the country, as well as due to other factors, according to Barclay’s Cooper Howes in an interview with Business Insider.

“Claims data have been volatile dating back to last fall, as factors such as computer system upgrades, seasonal adjustments related to moving holidays, and severe weather all potentially complicated the interpretation of the previously steady downward trend,” Howes explained. “That being said, the four week moving average has settled in around where it was last summer before these factors came into play, suggesting that it may be stabilizing.”

Wholesale

Meanwhile, sales for wholesalers dipped in January while inventories increased. Sales for merchant wholesalers dropped 1.9 percent from December to $432.6 billion, but were up 3.9 percent from January 2013, the Census Bureau reported last week.

Total inventories for merchant wholesalers grew by 0.6 percent in January to hit $521.2 billion. Key categories that saw gains were drugs and druggist sundries (up 2.7 percent), motor vehicles and parts (up 2.2 percent), and paper and paper products (up 2.8 percent).

January’s activity put the inventory-to-sales ratio at 1.20, which was virtually unchanged from January 2013’s ratio of 1.21.

This week, we can expect

  • Monday — Capacity utilization and industrial production for February from the Federal Reserve.
  • Tuesday — Building permits and housing starts for February from the Census Bureau; February consumer price index from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; Existing home sales for February from the National Association of Realtors; February leading economic indicators form The Conference Board.

Posted in Economic Advisor



Economic Advisor: March 11, 2015
March 11, 2015


 

The unemployment rate continued to drop, while wage growth slowed, and lay-offs increased. At the same time, personal incomes were under-performing, and consumer credit grew, but not as much as analysts would have liked.

Unemployment

The unemployment rate for February dipped to 5.5 percent as the U.S. economy added 295,000 jobs according to last week’s Bureau of Labor Statistics report. Key sectors that drove job growth were food services and drinking places, professional and business services, construction, healthcare, transportation and warehousing.

While the economy added jobs, wage growth contracted to a 0.1 percent increase, with average hourly earnings for non-farm payrolls growing by 3 cents to $24.78.

“We’re facing a turning point, and we’re going to see more pressure on wages,” Tara Sinclair, chief economist at the job search site Indeed.com, told the New York Times.

The population of long-term unemployed workers — people who have been without work for 27 weeks or longer — hovered at 2.7 million in February, which comprised 31.1 percent of the unemployed. The population of Americas involuntarily employed on a part-time basis for reasons such as their hours had been cut or that was the only work they could fine, also saw little change, hovering at 6.6 million.

Initial Jobless Claims

Turning to more recent employment figures, the number of first-time claims for unemployment benefits continued its growth to a nine-month high. Initial claims filed for jobless benefits filed in the week ending Feb. 28 grew to a considerable 320,000, a gain of 7,000 claims from the preceding week’s level of 313,000, the Employment and Training Administration reported last week. Many analysts chalked the sizable gain up to weather, more than economic activity.

“We suspect the pattern reflects the weather rather than fundamental deterioration,” High Frequency Economics chief U.S. economist Jim O’Sullivan wrote a note to clients. “That said, we will, of course, be on watch for the possibility that the rise in the last two weeks marks a change in the trend.”

The four-week moving average, which is consider a more stable measure of recent jobless activity, also grew, hitting 304,750 claims, which represented an increase of 10,250 claims from the previous week’s average of 294,500.

Personal Incomes and Spending

Personal incomes for January increased $50.8 billion, or 0.3 percent, and disposable personal income (DPI; income after taxes) increased $52.6 billion, or 0.4 percent, according to last week’s report from the Bureau of Economic Analysis. The market had expected a 04 percent increase for incomes.

Meanwhile, personal consumption expenditures (PCE) decreased $18.9 billion, or 0.2 percent. Personal outlays — PCE, personal interest payments, and personal current transfer payments — also decreased, dropping $16.3 billion in January.

So why the drop in spending? Most likely it was because Americans were hanging on to their hard-earned money. Personal savings — which is DPI less personal outlays — hit $728.5 billion in January, compared with $659.6 billion in December. The personal saving rate — which describes personal saving as a percentage of disposable personal income — hit 5.5 percent in January, compared with 5 percent in December.

Consumer Credit

Consumer credit grew at its slowest rate since November 2013, increasing 4.2 percent to $3.32 trillion, according to the Federal Reserve. The market had expected a $14 billion gain. Revolving debt, such as credit cards, actually dipped 1.6 percent, falling to $887.9 billion. Non-revolving debt, such as student or car loans, grew 6.3 percent to $2.44 trillion.

Regardless, any increase is a good increase according to Trey Loughran, president of Equifax’s consumer unit.

“The increase in debt in the country is an indication that consumers are getting healthier,” Loughran told USA Today. “They’re more comfortable using debt.”

This week, we can expect:

  • Tuesday — January wholesale inventories from the Census Bureau.
  • Wednesday — February Treasury department from the Treasury Department.
  • Thursday — February retail sales and import and export prices, as well as January business inventories from the Census Bureau.
  • Friday — February producer price index from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: March 04, 2015
March 4, 2015


 

Real estate was the big news maker last week, with existing and new home sales showing middling performance. While real estate was mixed, initial jobless claims took an unexpected bounce upward.

Existing Home Sales

Sales of existing homes for January were a mixed bag. Transactions of existing single-family homes, town homes, condominiums and co-ops, fell 4.9 percent to an annual rate of 4.82 million in January, according to the National Association of Realtors. This was their lowest pace in nine months, but 3.2 percent higher than the same period a year ago.

“January housing data can be volatile because of seasonal influences, but low housing supply and the ongoing rise in home prices above the pace of inflation appeared to slow sales despite interest rates remaining near historic lows,” said Lawrence Yun, NAR chief economist. “Realtors are reporting that low rates are attracting potential buyers, but the lack of new and affordable listings is leading some to delay decisions.”

Existing home inventory did tick up for January, growing 0.5 percent by the end of the month to 1.87 million existing homes available for sale, but was 0.5 percent lower than January 2014’s 1.88 million unit-supply. To Yun’s point, unsold inventory is at a 4.7-month supply at the current sales pace – up from 4.4 months in December.

January’s median price for existing homes of all types grew to $199,600, a 6.2 percent increase over January 2014, marking the 35th consecutive month of year-over-year price gains.

“The labor market and economy are markedly improved compared to a year ago, which supports stronger buyer demand,” Yun noted. “The big test for housing will be the impact on affordability once rates rise.”

New Home Sales

New home sales for January saw similar performance. Transactions of new single-family homes fell 0.2 percent from the previous month to a rate of 481,000, according to estimates released last week by the Census Bureau and the Department of Housing and Urban Development.  While down on a monthly basis, January’s sales were 5.3 percent higher than January 2014’s estimated rate of 457,000.

Looking at price, the median sales price of new houses sold in January came in at $294,300, and the average sales price was $348,300. Looking at supply, the estimate of new homes for sale at the end of January totaled 218,000, representing a supply of 5.4 months at January’s sales pace.

Once again, real estate analysts were saying that a true housing recovery depends on other economic factors.

“We are still taking sort of a meandering, bumpy path toward recovery,” IHS Global Insight U.S. Economist Stephanie Karol told the New York Times. “We expect housing will improve later this year due to the improvement in the labor market and credit conditions.”

Initial Jobless Claims

Looking at one of those other market factors, employment, first-time jobless claims filed by the newly unemployed saw their biggest jump since December 2013 last week; that’s after falling by a similar amount the week before. Initial jobless claims for the week ending Feb. 21 shot up to 313,000, an increase of 31,000 claims from the previous week’s revised level of 282,000, the Employment and Training Administration reported last week.

The four-week moving average, which is considered a more reliable measure of jobless activity also saw a stiff increase, growing to 294,500, a gain of 11,500 from the preceding week’s revised average of 283,000.

This week, we can expect a busy slate of economic headlines:

  • Monday — January personal incomes and spending from the Bureau of Economic Analysis; January construction spending from the Census Bureau.
  • Tuesday — February car and truck sales from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; January factory orders from the Census Bureau.
  • Friday — Consumer credit for January from the Federal Reserve; January trade balance from the Census Bureau; February unemployment, payrolls, hourly earnings and average workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



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