Saturday, February 1, 2020

National Economic Outlook - January 2020

Written By: Ingo Winzer, President of Local Market Monitor, Inc.

Retail sales for 2019 were up 3.6 percent from 2018. With inflation running around 2 percent, that means a real increase of 1.6 percent or so. Car sales were good and on-line sales were terrific (up 13 percent) but when you subtract out inflation, every other sector did poorly - furniture stores, food stores, hardware and lumber stores, drug stores, electronics, sporting goods.

It's difficult to see this scenario changing in 2020, not just because of Amazon but because consumers are already up to their ears in debt - where will they get the money?

Total jobs in December were up 1.4 percent from the previous year, pretty much in line with the performance of recent months. I don't see a better picture in 2020, it's much easier to see slower growth. While a recession in 2020 is unlikely, the low growth of the economy means it can quickly slide if shocks of one kind or another (trade wars, real wars, political wars) make consumers cautious.

Jobs were up 2.5 percent in healthcare, 2.3 percent at restaurants, 1.9 percent in business services, 1.4 percent in finance, 0.7 percent in government, and virtually flat in retail and manufacturing.

Temporary jobs, a category that can include secretaries and clerks as well as doctors and engineers, and that served as a leading indicator before the 2008 recession (but also fell in 2016) is now in negative territory.

Thursday, October 24, 2019

National Economic Outlook - October 2019

Written By: Ingo Winzer, President of Local Market Monitor, Inc.

The number of jobs in September was up 1.4 percent from last year, a repeat of August and a confirmation that the August data weren't an outlier. It's now most likely that we'll see a further weakening in the months ahead, and the big question is whether the economy can keep gliding along at this reduced pace.

The last two recessions began when job growth edged down towards 1 percent and then swiftly dropped to zero and below. If we see a break point like this again, job growth could be negative in the next year.

Jobs in September were up 2.6 percent in healthcare, 2.1 percent in business services, 2 percent at restaurants, 1.2 percent in finance,  and 0.8 percent in government. Retail jobs were down again. Although jobs were up in manufacturing and construction, both sectors continue on a downward trend - a negative indicator for the economy. And within business services, temp jobs - another bell-weather category - were up just 0.6 percent.

There's more bad news than good news here, because it's difficult to see how these negative trends will be reversed.

Wednesday, September 11, 2019

National Economic Outlook - September 2019

Written By: Ingo Winzer, President of Local Market Monitor, Inc.

The number of jobs in August was up just 1.4 percent from last year, the smallest increase in the last two years, and down significantly from the 2 percent rate of January. Any further slowing will be the worst since the big recession.

That won't necessarily lead to another recession - certainly not one of that epic scale - but the slowing of job growth in every major sector in the last few months suggests that an easy fix is not in the works because the economic problem is system-wide.

It's much easier for the US economy to go into recession these days because it's mainly a service economy. It's easy for consumers to cut back on services if they feel a bit pinched. You need food, shelter, your car, your phone, some clothes - but you don't need the extra latte, the extra movie, you can put off the trip to the Rockies, you might even delay that visit to the doctor.

Jobs in August were up 2.4 percent in healthcare, 2.1 percent in business services, 1.9 percent at restaurants, 1.3 percent in finance and 1 percent in manufacturing. Jobs were down in retail and almost flat in government.

Construction jobs increased 2.3 percent, not even half the 5 percent rate of January. A further slowing will mean that businesses are delaying new projects.

Thursday, August 15, 2019

National Economic Outlook - August 2019

Written By: Ingo Winzer, President of Local Market Monitor, Inc.

The data on Gross Domestic Product for the second quarter are as unenlightening as always. The 2.1 percent annualized growth over the first quarter was a combination of heavy consumer spending, cuts in company inventories, a drop in exports, and strong government spending.

The previous quarter it was poor consumer spending, higher inventories, and higher exports. Go figure.

The job data, on the other hand, are consistent with what we've been seeing for several months: a slower rate of growth. Jobs in July were up 1.5 percent from a year ago, the same as in May and June, and down from the 1.8 percent that prevailed earlier this year. This isn't yet a cause for concern, but a further drop to 1.3 percent would be. We're at a point where there isn't much wiggle room.

Jobs were up 2.5 percent in healthcare, 2.2 percent in business services, 2.1 percent at restaurants, 1.2 percent in finance and 1.2 percent in manufacturing. Retail jobs were slightly down, government jobs slightly up.

Jobs in construction were up 2.7 percent, which seems like a lot but isn't; last year it was 4.8 percent. I have a strong suspicion that home builders in urban markets concentrated on the upper end of the market and it's now softening.

Sunday, July 28, 2019

Local Market Monitor - July 2019

Written By: Ingo Winzer, President of Local Market Monitor, Inc.

Month-to-month changes in economic statistics usually tell us nothing about where the economy is headed, there's too much variability. But a six month comparison might be enlightening at a time when the economy seems to be slowing.

In January, the total number of jobs in the economy was up 2.0 percent from the previous year - this happened to be the high-spot of growth in the last couple of years. In June, that growth was 1.5 percent.

What accounts for the drop, especially since jobs in healthcare - one of the biggest sectors of the economy - actually did better in June? Most important, business services did worse: the change from 2.5 percent in January to 2.2 in June is meaningful because the category includes so many jobs. There was also a slowdown of growth in restaurants, finance, retail, manufacturing and - somewhat ominously - construction.

Whether commercial or residential, construction projects take time and money, and developers won't start a new one if they think future demand will be weak - which usually means they're having trouble selling their existing product.

Wednesday, June 26, 2019

National Economic Outlook - June 2019

Written By: Ingo Winzer, President of Local Market Monitor, Inc.

The rate of job growth was lower in May, a 1.5 percent annual rate, not yet a cause for concern but we'll watch closely to see what the data look like next month. The economy has been creating jobs at a modest rate, by historical standards. Any further slowing can quickly lead to trouble.

Part of the slowdown in May was because employers stopped hiring more temporary workers, a sign they anticipate less business, not more.

Trade wars can have an outsized effect on an economy that's slowing anyway, even though US exports of goods are less than 10 percent of gross domestic product. Our biggest exports are electronics, chemicals, aircraft and machinery.

Jobs were up 2.3 percent in business services, 2.6 percent in healthcare, 2.5 percent at restaurants, 1.1 percent in finance. Government jobs were up slightly, retail jobs down 0.7 percent. manufacturing jobs were up 1.5 percent, construction jobs 2.8 percent.

Sunday, May 12, 2019

National Economic Outlook - May 2019

Written By: Ingo Winzer, President of Local Market Monitor, Inc.

Measured by Gross Domestic Product, the economy grew at a 3.3 percent annual rate in the first quarter, after growing at a 2.2 percent rate in the fourth quarter of 2018. If you do away with the quarterly variations, the economy has been growing around 3 percent, and Consumer Spending - by far the biggest chunk - has been growing around 2.5 percent.

By recent standards these are good rates of growth, but they're also low enough so that there's little room for any slowdown before we're in a recession. I continue to worry that consumer spending is mainly being propped up by growing levels of consumer debt.

Total jobs in April were up 1.8 percent from last year. Jobs were up 2.6 percent in business services, 2.5 percent in healthcare, 2.8 percent at restaurants, 1.3 percent in finance. Government jobs were up slightly, retail jobs were down slightly.

Jobs in manufacturing, though up 1.6 percent, are no longer growing at the hot pace of last year. And jobs in construction are growing at a slower pace that puzzles me because the overall level of construction remains low, despite higher prices for housing. Maybe it's just very difficult to build more housing where it's most needed, in tight urban centers.