Pollack: The economy is white hot



December 11th, 2017

The Monday Morning Quarterback 

A quick analysis of important economic data released over the last week

In relative terms, the economy is white hot. It is running on all cylinders. And, the imbalances that usually result from this strength in economic activity, with one possible exception, are not in sight. The reason for this is that “in relative terms” simply means that the level of economic activity this cycle has been much slower than any of its predecessors. Thus, the normal pressures felt at this stage of the cycle are not here at the moment.

What’s even more astonishing is that, given the stimulus that will be created by the proposed tax cuts, reductions in certain types of regulation and infrastructure spending that is likely to take place, growth is expected to accelerate in 2018. Will this cause the normally cyclical problems to manifest themselves? At some point, they will. But, at present, that point is unknown. Time to enjoy the smooth ride. Smooth at least economically.

How about last week’s data?  Not much happened. The jobs report exceeded expectations. There was an increase in forecasts for real GDP in 2018. There were also continued significant gains in consumer net worth and high levels of consumer confidence. More credit card use is occurring on the part of consumers as they become less reluctant about using debt. Manufactures’ new orders showed strength and there was also continued strength in the country’s non-manufacturing sector.

This is quite a report card.  Look for the FED to raise rates modestly this month.

U.S. Snapshot:

Total nonfarm payroll employment increased by 228,000 in November. This exceeded expectations that were for an increase of about 200,000. Employment continued to trend upward in professional and business services, manufacturing, and health care.

Despite the higher than expected growth in employment, the unemployment rate held steady at 4.1%. This compares to 4.1% in October and 4.6% a year ago.  The labor force participation rate, now back to where it was in the mid-1970’s, has at least stabilized (see chart below).

The Blue Chip consensus is now calling for real GDP growth of 2.3% in 2017 and 2.6% in 2018. These 4th quarter to 4th quarter numbers are up slightly from last month’s forecasts.

The University of Michigan consumer sentiment index (preliminary for December) remains elevated though continues to edge back from October’s expansion peak of 100.7. The index now stands at 96.8, about the same as November and slightly down from a year ago. The current level, though, has to be considered high (see chart below).

Household wealth hit a record again last quarter and now stands a solid 8.0% above a year ago.

Revolving credit has been on the rise indicating less reluctance among consumers to run up their credit cards and helping left consumer credit to a higher than expected gain in October. This is one reason why it appears that the country is enjoying a strong Christmas sales season to date.  Nonrevolving credit (mainly auto and student loan debt) is also increasing, but, at a slower pace. In October, revolving credit grew by 0.8% and now stands 5.9% above a year ago.  Revolving credit was up 0.4% and now stands 5.2% over a year ago.

Manufacturers’ new orders were down 0.1% in October, but, now stand 3.7% above October 2016. The ratio of inventories to sales remained at 1.37.

The ISM non-manufacturing index stood at 57.4 in November. While this is down from 60.1 in October, it is about the year earlier level of 56.2. Any reading of 50 or above indicates an expanding non-manufacturing sector.

Arizona Snapshot:

Maricopa County median resale prices are approaching the 2006 peak. The previous peak was $253,418 over 11 years ago. November’s number was $243,000. That’s an 8.0% gain over a year ago. New home prices remain in a range first reached over a year ago. The November number was $328,419. New home builders are still finding it difficult to build for the less expensive end of the market

About EDPCo

Elliott D. Pollack & Company (EDPCo) offers a broad range of economic and real estate consulting services backed by one of the most comprehensive databases found in the nation. This information makes it possible for the firm to conduct economic forecasting, develop economic impact studies and prepare demographic analyses and forecasts. Econometric modeling and economic development analysis and planning are also part of our capabilities. EDPCo staff includes professionals with backgrounds in economics, urban planning, financial analysis, real estate development and government. These professionals serve a broad client base of both public and private sector entities that range from school districts and utility companies to law firms and real estate developers.

For more information, contact –

Elliott D. Pollack & company
7505 East Sixth Avenue, Suite 100
Scottsdale, Arizona 85251

Share this!

Additional Articles

News Categories

Get Our Twice Weekly Newsletter!

* indicates required

Rose Law Group pc values “outrageous client service.” We pride ourselves on hyper-responsiveness to our clients’ needs and an extraordinary record of success in achieving our clients’ goals. We know we get results and our list of outstanding clients speaks to the quality of our work.