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.

National Economic Outlook November 2018

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

The Gross Domestic Product is one way of looking at the economy. It includes consumer spending, what companies invest in new equipment and buildings, changes in business and farm inventories, exports and imports, and government spending. In the news we usually hear how much it’s changed from quarter to quarter, which varies a lot. But if we look at the change from the same quarter of the previous year it’s easier to spot trends.

Seen that way, GDP has been steadily growing for the past two years, particularly because of more spending on healthcare. It doesn’t match the surge of healthcare spending when the Affordable Care Act was enacted, but points to the fact that healthcare spending – and the jobs it creates - will be driving local economies for quite some time.

In October, total jobs were up 1.7 percent from last year. Jobs were up 1.4 percent in finance, 2.6 percent in business services, 2.1 percent in healthcare, and 1.6 percent at restaurants. Government jobs barely increased, as did jobs in retail. With more and more on-line shopping, we have to accept that the low job growth in retail is now a permanent feature of the economy.

Job gains in manufacturing were 2.3 percent, continuing the trend of the past year. This may be a temporary response to international trade disputes, but it could also signal that highly-automated US factories have regained the edge in making good-quality products at a reasonable cost.

National Economic Outlook - October 2018

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

After the wrenching ups and downs of real estate markets over the last ten years, it's fair to ask where we are now. Home construction can give us a partial answer. Back in the boom days before 2008, when sub-prime mortgages put an extra 5 million people into a home, builders were putting up units as fast as they could - about 2 million per year. It still wasn't enough, though, and home prices kept climbing.

Then, during with the recession, when many sub-prime loans ended in foreclosure, construction plunged to little more than half a million units per year - and many builders went out of business. In recent years activity picked up again and last year 1.3 million new homes were built.

For the size of the US population, however, the average number of homes built per year should be 1.8 million. We haven't seen that level since 2006. What this means is that even though too many homes were built before 2008, we're now facing a chronic shortage. Builders can't possibly scale up fast enough, so we'll see demand greater than supply for years - and higher home prices.

Total jobs in September were up 1.7 percent from last year, the same rate we've seen for months. Jobs were up 2.2 percent in manufacturing, 0.4 percent in retail, 1.4 percent in finance, 2.8 percent in business services, 1.9 percent in healthcare, and 1.7 percent at restaurants. As usual, government jobs were almost flat.

The increase in manufacturing jobs is encouraging, but it's business services that's pulling the economy along. The lack of growth in retail jobs - online shopping - looks like it's permanent.