Wednesday, August 9, 2017

National Economic Outlook - August 2017

Written By:
Ingo Winzer, President


Local Market Monitor


If the number of jobs in retail, instead of increasing 2 percent a year, will slowly erode from now on, is this a bad thing for the economy? Retail sales seem to be doing fine, its just taking fewer people to produce those results.

From an economic perspective, any efficiency is a good thing. But looking at the larger picture, the 300,000 jobs with annual pay of $30,000 that AREN'T being created every year are a blow to families for whom this is often a second income. Aside from restaurants and hotels, retail is the lowest-paying sector in the economy and the last possibility for people with no special skills. The $9 billion of retail salaries saved each year will go into somebody's pocket, but the social consequences of yet another disappearing opportunity near the bottom of the ladder may end up being a lot greater than that.


Overall, the number of jobs in July was up 1.5 percent from last year, in line with results so far this year. Jobs were flat in manufacturing, retail and government - which together make up a third of all jobs - up 2 percent in finance, 3 percent in business services, 2 percent in healthcare, and 3 percent at restaurants. In the construction sector jobs were up 3 percent, which seems like a lot but, starting from such a low level, it's nothing to write home about.



Tuesday, July 18, 2017

National Economic Outlook - July 2017

Written By:
Ingo Winzer, President


Local Market Monitor

Jobs in retail sales were flat again in June. What's going on here? I've been harping on this for a few months but the picture still isn't clear. Is the lack of growth in retail jobs an indicator that growth is slowing down? Or does it just mean that we're buying more stuff on-line?

In dollars, retail sales (including on-line) increased 4 percent in 2014, 3 percent in 2015, 3 percent in 2016, and 4 percent so far this year. So, there isn't a downward trend in spending, at least not in the past few years,. But this IS slower spending than the 5 and 6 percent increases we used to have. What we're probably seeing is a combination - more internet sales, but also a SHIFT in spending, mainly by people whose income has been flat. Consider that 40 percent of renters pay more than a third of their income for housing, and a bunch of the rest now goes for phone and internet service.

All of this doesn't completely answer our question, because the lack of new jobs in retail - the lowest paying part of the economy - isn't being made up elsewhere. While internet sales did increase, we're ALSO seeing a slowing of overall growth. Jobs in June overall were up 1.5 percent from last year - flat in manufacturing, retail and government, but up 3 percent in business services, 2 percent in healthcare, and 2 percent at restaurants.

Monday, June 12, 2017

National Economic Outlook - June 2017

Written By:
Ingo Winzer, President

Local Market Monitor

Continuing the trend of recent months, in May the number of jobs in retail sales was no better than last year. This very worrying development isn't really so surprising because we've seen that the income of consumers has barely increased for years, while the amount of debt they're carrying has grown. At some point that has to translate into less spending.

Other parts of the economy are still doing well. Jobs in business services, for example, are growing at a faster rate than last year. Jobs in healthcare are growing at a slower rate, but still at a good clip - and growth seems to be fine in finance, construction and at restaurants. Ok, jobs aren't growing in manufacturing or government - almost a quarter of the economy - but they haven't for a while. So why is the poor showing in retail now so important? Because it's a LEADING indicator.

Jobs in healthcare didn't even feel the 2008 recession until 2009, jobs in business services were still doing fine in late 2007. But jobs in retail had already sputtered in 2006, well before the crash in early 2008. Stay tuned.

Overall, jobs in May were 1.5 percent higher than last year. This seems to be the new normal in 2017, as 1.8 percent was the new normal in 2016. Jobs were up 3 percent in construction, flat in manufacturing, flat in retail, up 2 percent in finance, 3 percent in business services, 2.3 percent in healthcare, 2 percent at restaurants, and a half percent in government.

Unemployment is at a low 4.3 percent, whatever that means these days when many people have just dropped out of the regular workforce.

Thursday, May 11, 2017

National Economic Outlook - May 2017

Written By:
Ingo Winzer, President


Local Market Monitor

I noted last month that the number of jobs in the retail sector, while still higher than  a year ago, is only growing very slowly. Statistics from April point to the same disconcerting conclusion, so we'll now examine more closely what's going on here. There are two important reasons: when people buy less stuff, the rest of the economy follows; and, retail is one of the last sectors where people with no special skills can find a job. Retail provides 11 percent of all jobs in the US.

The rate of growth in retail jobs was 1.4 percent in January, 0.8 percent in February, and 0.3 percent in both March and April. Is this because people are buying less stuff? Very likely. Sure, internet sales are up but internet sales are still only ten percent of retail sales. For the first three months of the year, retail sales in dollars were up 4 percent, but subtract inflation of 2.5 percent and sales are pretty meager - concentrated in cars (bought on credit), furniture (bought on credit), gas (prices are higher), drugs (paid by insurance), and building materials (mainly bought by businesses). People are buying less real consumer stuff - food and clothes.

Measuring things is difficult, so statistics aren't always correct. It's too early to conclude the economy is in trouble. But a few more months of this trend and I'll be willing to stand up and start shouting.

Overall, the number of jobs in April was up 1.4 percent from last year, the LOWEST rate of growth since the last recession. Jobs were essentially flat in manufacturing and retail, up 2 percent in finance, 3 percent in business services, 2 percent in healthcare and at restaurants. The government is a non-player. Unemployment fell to a low 4.4 percent in April.

Wednesday, April 12, 2017

National Economic Outlook - April 2017

Written By:
Ingo Winzer, President


Local Market Monitor

Because the government reports such detailed statistics about the economy, we can think of developments in some subsectors as leading indicators of what will happen with the overall economy in the near future. For example, we closely watch the number of jobs in truck transport and temporary help because we think these are quickly affected by a slowdown of demand. But the data for these subsectors, which are around one percent of all jobs, can vary a lot from month to month, so you can't always be sure what they're telling you.

An even closer connection to demand is the number of jobs in retail stores. This subsector is much larger - about ten percent of all jobs - and if the data from the last few months can be believed, it's telling us that we will see a significant slowdown sooner rather than later. In March, the annual rate of growth in retail jobs was 0.3 percent - compared to 1.4 percent in January and 1.7 percent a year ago. TV reports tell us this is just because more people are buying on-line, total demand remains the same. But people have been buying on-line for a long time, so I wouldn't bet on that as the full explanation. The numbers may vary from month to month, but I'll be watching the retail job figures very closely this year.

Largely because of the slow growth in retail, overall job growth in March was 1.5 percent - the slowest rate in five years. Jobs were up 0.3 percent in manufacturing, 2.2 percent in finance, 3.2 percent in business services, 2.3 percent in healthcare and 1.9 percent at restaurants. Unemployment was a low 4.5 percent.

Tuesday, March 14, 2017

National Economic Outlook - March 2017

Written By:
Ingo Winzer, President


Local Market Monitor

We like to measure the growth of the economy in terms of jobs - rather than Gross Domestic Product, for example - because jobs translate directly into demand for housing. For some time now it's been clear that the economy is not creating the kinds of jobs it used to. A third of the new jobs created in the past two years are in restaurants, social services and retail stores, where pay is less than half the national average of about $50,000. At the other end, only ten percent of new jobs (mainly finance and  computer related) are in businesses where pay is close to $100,000.

Clearly, the former jobs encourage renting, while the latter spur home buying. Going forward, we'll more closely monitor the growth of low-end and high-end jobs.

As mentioned last month, we believe that the economy will be growing at a slower rate over the next few years. Because of the low level of home construction over the past decade, demand will nonetheless outstrip supply, pushing prices and rents up, but not in all markets. Higher interest rates will cut demand somewhat by increasing the cost of mortgages and decreasing the appeal of rental investments. This is not a danger point, but closer attention to the dynamics in individual markets is a good idea.

Jobs in February were up 1.7 over last year - flat in manufacturing, up 3.5 percent in construction, 1 percent in retail, 2.3 percent in finance, 3 percent in business services, 2.4 percent in healthcare, 2.3 percent at restaurants, and 1 percent in government.

Jobs in truck transport were up 1.3 percent - better; and temp jobs were up 3.2 percent - good.  



Low-end jobs (restaurants, social services, retail) increased 472,000; high-end jobs (finance and insurance, information, computer services) increased 210,000.



Wednesday, February 15, 2017

National Economic Outlook - February 2017

Written By:
Ingo Winzer, President

Local Market Monitor

Home prices are mainly determined by supply and demand, and a lot of the demand is tied to the economy. When the economy adds jobs, demand grows.

Our forecast of home prices in local markets estimates local economic growth over the next three years. Since the end of the recession, in about 2010, our forecast has assumed that all local economies will get better and better.

We're now changing that assumption. The national economy hit a peak in 2015 and has since been growing at a steadily slower rate. Our assumption for the next three years is that growth in all local markets, with some exceptions, will no longer get better and better but will just continue at the current rate.

The effect on our home price forecasts isn't very big. Nationally, the forecast for the next three years only drops from 17 percent to 14 percent, still a healthy increase. But the larger concern is the possibility that the economy is on a slide to slower and slower growth - which would affect demand more sharply.

Jobs in January were up 1.5 percent from last year; flat in manufacturing, up 1.4 percent in retail trade, up 2.3 percent in finance, 2.7 percent in business services, 2.4 percent in healthcare, 2 percent at restaurants, and up a half percent in government.

Jobs in truck transport were up 0.6 percent - not good; and temp jobs were up 3.1 - much better than in previous months.