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TLV Economy: June 2, 2017

The price of anything is the amount of life you exchange for it.”
- Henry David Thoreau

 
LEYENDECKER ECONOMIC VIEW

After Trump’s election, a few well respected CEOs and investors suggested the country’s animal spirits could be ignited. This was reflected in euphoric post election economic sentiment surveys. Since Trump has taken office, sentiment has declined slightly, but still remains strong.
 
Optimistic that Trump the Washington outsider and Trump the businessman would stimulate the economy through improved economic and tax policy fueled rising sentiment. But so far, the Trump administration has been stuck in the swamp, unable to move forward with neither health care nor tax policy improvements.
 
As efforts to undermine Trump’s legitimacy persist, the odds look long that worthwhile policy changes will be made anytime soon. The longer policy doesn’t change, the more likely sentiment and animal spirits will be subdued. Economy may very well stagnate for longer than many expect or desire.
 
One positive catalyst for the U.S. economy is growing investment activity in the domestic oil and gas industry. That growing investment is leading to growing oil and gas production, which then drives greater investment in energy transportation and processing infrastructure. No matter the political talk about public infrastructure investment, the energy private sector is back to being a positive force in the U.S. economy.

ECONOMIC DASHBOARD
A log of recent releases of data impacting our world
 
EMPLOYMENT
 
Bureau of Labor Statistics on Employment
Less than desired job growth in May
(June 2, 2017) Total nonfarm payroll employment increased by 138,000 in May, and the unemployment rate was little changed at 4.3%. Job gains occurred in professional and business services (38,000), food services and drinking establishments (30,000), health care (24,000) and mining (7,000). The labor force participation rate declined by 0.2% in May, but has shown no clear trend over the last 12 months.
 
Department of Labor Unemployment Insurance Weekly Claims
Weekly unemployment insurance claims rising off February low
(June 1, 2017) In the week ending May 27, the advance figure for seasonally adjusted initial claims was 248,000, an increase of 13,000 from the previous week’s revised total. The 4-week moving average was 238,000, an increase of 2,500 from the previous week’s revised average. Claims have risen since February 2017 when they hit 223,000, the lowest level for initial claims since March 31, 1973.
 
The advance seasonally adjusted insured unemployment rate 4-week moving average was 1,914,500, a decrease of 16,000 from the previous week's revised average. This is the lowest level for this average since January 12, 1974 when it was 1,881,000.
 
Conference Board Help Wanted Online Index
Following April decrease, the index registered a gain in May
(May 31, 2017) Online advertised vacancies increased 195,600 to 4,809,200 in May. Supply/demand rate stands at 1.53 unemployed for each advertised vacancy, with a total of 2.4 million more unemployed workers than the number of advertised vacancies. The number of unemployed was approximately 7.1 million in March.
 
INDUSTRY
 
Commerce Department on Construction
Construction increase over 2016
(June 1, 2017) Total construction spending during April 2017 was estimated at a seasonally adjusted annual rate of $1,218.5B, 1.4% below the revised March estimate of $1,235.5B. The April 2017 figure is 6.7% above the April 2016 estimate. Construction spending for the first four months of 2017 amounted to $359.5B, a 5.8% increase from the first four months of 2016.
 
JD Power Auto Sales
Auto sales continue to sag despite Memorial Day incentives
(May 25, 2017) Even an extra selling day didn’t help lift auto sales out of its 2017 malaise. Total deliveries softened to 1.54 million units. Adjusting for one more selling day in May 2017, sales fell 3.5% below last May.
 
HUD/Census Bureau on New Home Sales
New home sales falling
(May 23, 2017) Sales of new single-family houses in April 2017 were at a seasonally adjusted annual rate of 569,000. This is 11.4% below the revised March rate of 642,000, but still 0.5% above April 2016.
 
The seasonally adjusted estimate of new houses for sale at the end of March was 268,000, representing a 5.7-month supply at current sales rate compared to a 5.2-month supply in December 2016.
 
U.S. Census Bureau on Durable Goods
Durable goods orders turn down
(May 26, 2017) New orders for manufactured durable goods in April decreased $1.6 billion or 0.7% to $231.2 billion. This decrease, down following four consecutive monthly increases, followed a 2.3% March increase. Excluding transportation, new orders decreased 0.4%. Excluding defense, new orders decreased 0.8%. Transportation equipment, down following two consecutive monthly increases, led the decrease, $1.0 billion or 1.2% to $78.5 billion.
 
CONSUMER
 
Personal Income and Outlays from the BEA
Income and expenditures grew similarly
(May 30, 2017) Personal income increased $58.4 billion (0.4%) in April. Disposable personal income (DPI) increased $56.5 billion (0.4%) and personal consumption expenditures (PCE) increased $53.2 billion (0.4%). Personal consumption expenditures are up 1.6% from a year ago. Personal saving was $759.1 billion in April, and personal saving as a percentage of disposable personal income was 5.3%.  

Consumer Credit from the Federal Reserve
Consumer debt still growing faster than income
(May 5, 2017) Consumer credit increased at a seasonally adjusted annual rate of 4.25% during the first quarter. Revolving credit was little changed, while nonrevolving credit increased at an annual rate of 5.75%. In March, consumer credit increased at an annual rate of 5.2%.
 
St. Louis Fed on Savings
Savings rate has grown from January, but still below recent peak
(May 1, 2017) The personal savings rate for April 2017 stayed steady with March at 5.3%, up from 5% in January. The most recent peak in savings came in at 6.2% in March 2016. The more recent bottom of 2.6% was in August 2007. Personal savings rates averaged above 10% between 1960 and 1980. The personal savings rate was at 12.7% of disposable income in November 1981. Since then, ever-cheaper credit seems to have resulted in ever-smaller savings.
 
ECONOMIC SENTIMENT
 
NIFB Small Business Sentiment
Small business sentiment slumping from post election peak, but still historically high
(April 2017) The Index slipped 0.2 points in April to 104.5, still a very strong reading. April was the sixth straight month for historically high optimism, a hot streak not seen since 1983. Five of the Index components posted a gain, reaching levels not seen since before the previous administration. Three of the components declined, and two were unchanged. Nearly all the slight decline was attributable to an 8-point plunge in expected business conditions. Most of the data were collected immediately after Congress failed to repeal and replace Obamacare.
 
Institute for Supply Management PMI
Purchasing Manager’s Index below post election peak, but still solid
(June 1, 2017) The May Purchasing Manager’s Index (PMI) registered 54.9%, a very slight increase from April’s 54.8. A reading above 50 indicates an expanding economy. The overall economy has been growing for 96 consecutive months. Manufacturing activity has been growing for the last 9 months. Follow the link above to insightful quotes from survey participants on various impressions of their industry’s activity.
 
Consumer Confidence
Consumer Confidence declines in May
(May 30, 2017) The Conference Board Consumer Confidence Index®, which had decreased in April, declined slightly in May. The Index now stands at 117.9 (1985=100), down from 119.4 in April. The Present Situation Index increased marginally from 140.3 to 140.7, while the Expectations Index declined from 105.4 last month to 102.6 in May.
 
“Consumer confidence decreased slightly in May, following a moderate decline in April,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “However, consumers’ assessment of present-day conditions held steady, suggesting little change in overall economic conditions. Looking ahead, consumers were somewhat less upbeat than in April, but overall remain optimistic that the economy will continue expanding into the summer months.”
 
Conference Board Leading Economic Index (LEI)
LEI growth steady since beginning of the year
(May 18, 2017) The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.3% in April to 126.9 (2010 = 100), following a 0.3% increase in March, and a 0.5% increase in February.

“The recent trend in the U.S. LEI, led by the positive outlook of consumers and financial markets, continues to point to a growing economy, perhaps even a cyclical pickup,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “First quarter’s weak GDP growth is likely a temporary hiccup as the economy returns to its long-term trend of about 2%. While the majority of leading indicators have been contributing positively in recent months, housing permits followed by average workweek in manufacturing have been the sources of weakness among the U.S. LEI components.”

Institute for Supply Management Non-Manufacturing Survey
Service sector keeps on ticking
(May 3, 2017) The Non-Manufacturing Survey registered 57.5%, a 2.3 percentage point increase over the March reading of 55.2%. This represents continued growth in the non-manufacturing sector at a faster rate. Follow the link above to insightful quotes from survey participants on various impressions of their industry’s activity.
 
THE BIG PICTURE
 
GDP from the Bureau of Economic Analysis
Revised GDP up for first quarter
(May 26, 2017) Real gross domestic product (GDP) increased at an annual rate from 0.7% to 1.2% in the first quarter of 2017 according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.1%.  
 
This new GDP estimate is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 0.7%. With this second estimate for the first quarter, the general picture of economic growth remains the same; increases in nonresidential fixed investment and in personal consumption expenditures (PCE) were larger and the decrease in state and local government spending was smaller than previously estimated. These revisions were partly offset by a larger decrease in private inventory investment.

Bureau of Labor Statistics on Consumer Prices
Rebound from March deflation
(May 12, 2017) Rebounding after a decline in March, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% in April on a seasonally adjusted basis. Over the last 12 months, the all items index rose 2.2% before seasonal adjustment. Increases in indexes for shelter, energy, tobacco and food all contributed to the monthly increase in the all items index. The energy index rose 1.1%, with all 3 of its major component indexes rising. The food index rose 0.2%, mostly due to a sharp increase in the index for fresh vegetables. 
 
Federal Reserve on Interest Rates
Still waiting to increase rates
(May 30, 2017) In a joint meeting of the Federal Open Market Committee (FOMC) and the Board today, the FOMC decided to maintain the target range for the federal funds rate at 0.75% to 1%. Overall, Federal Reserve Bank directors judged that the economy seemed to be continuing to expand at a solid pace. Directors generally noted steady or improved economic activity across various sectors, as well as greater optimism among households and businesses about the prospects for continued growth.
 
NEWS YOU CAN USE
 
104 years of income tax: then and now
In 1913, the tax bracket range was 1% to 7%. Today, it’s 10% to 39.6%. What a difference 100 years make. In 1913, we had 400 pages in tax code. Today? 74,608 pages.
 
Why are so many women dropping out of the workforce?
Since 2000, the share of women working in prime earnings years has dropped. What does this say about our economy today, and what will it mean for overall economic growth tomorrow?
 
AND JUST FOR FUN
 
Impossible dream with The Smothers Brothers
Dreaming the impossible? Just go back to sleep, say the Smother Brothers. We’re never too old—or too young—for hokey.
 
IN CASE YOU MISSED IT
 
Doug Leyendecker’s Armchair Economics Essay: Recession, Anyone?

TLV Industry: May 5, 2017
Optimism tempered by reality
 


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