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.

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.

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.

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.

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.

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.

National Economic Outlook - February 2019

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

The government shutdown affected most of the agencies from which we get data for our monthly commentaries, so this month we’re just providing the basics. Next month we’ll have a full range of options available, including a host of full-year data for 2018.

In January, total jobs were up 1.9 percent from the previous year, the best performance since 2015 and following an uptick to 1.8 percent last month. Through much of the last couple of years, job growth has bumped around at the 1.6 percent level.

While the increase is encouraging in general, the effect on real estate markets will be minor because many of the ‘extra’ jobs are in the lowest-paid sector of the economy: hotels and restaurants. Either more Americans are taking their vacations within the US or they’re getting more of their food from Starbucks and sandwich shops.

Jobs were up 2.1 percent in manufacturing, 2.6 percent in business services, 2.4 percent in healthcare, 1.5 percent in finance, and almost flat in retail and government. Unemployment rose slightly, to 4 percent.

National Economic Outlook - January 2019

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

The economy is always changing, even though economists routinely pretend the data from one period can be directly compared with data from another. Some of the interesting changes can be seen by looking at the types of jobs the economy is creating.

For example, in 2018, of the 2.7 million new jobs created, 130,000 were at management and computer consulting companies, 100,000 at temp agencies, 160,000 at warehouse and delivery companies, and 280,000 in manufacturing.

The manufacturing jobs probably reflect more production from highly-automated factories that can now compete with imports; the warehouse and delivery jobs reflect the rise of on-line shopping; the consulting jobs show that companies are trying to adapt to a new environment; and the temp jobs show that companies are more aware of fluctuating demand for their products.

Computerized manufacturing and shopping are with us to stay, we’ll see more of that. But temp and consulting jobs will be the first to go when the economy slows down, an instability built into the system.

In December, total jobs were up 1.8 percent from last year. Jobs were up 2.8 percent in business services, 2.3 percent in manufacturing, 2.3 percent in healthcare, 2.2 percent at restaurants, and 1.3 percent in finance. Unemployment increased slightly, to 3.9 percent.

National Economic Outlook - December 2018

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

Because homes are so expensive, income is an important way to look at real estate markets. The disturbing fact is that average income - adjusted for inflation - has remained almost the same for the past 15 years, cycling between $29,000 and $31,000. This is the median income, half of workers make more, half make less. If that’s how much money you make, you can’t buy a home (unless, of course, there are two of you).

Another way to see income is through IRS data. 80 million tax payers make less than $50,000 a year. 25 million make more than $100,000. And 30 million are in the middle. The 80 million mostly rent, the 25 million already own a home. The 30 million are the swing vote - they may rent, they may be first-time home buyers. Their economic future will have a lot to say about real estate.

In November, total jobs were up 1.6 percent from last year. Jobs were up 2.7 percent in business services, 2.2 percent in manufacturing, 2 percent in healthcare, 1.8 percent at restaurants, and 1.4 percent in finance. Jobs in retail and government were essentially flat.

While the job situation remains adequate, home prices in some large markets are leaping higher – so much higher that the danger of local real estate bubbles is again with us. Who would have thought so just five years ago? I don’t think either a recession or a real estate bust is at hand – yet. But a soft landing for either the economy or real estate markets is always wishful thinking. And bad news for one always makes the other worse.