ELLIOTT D. POLLACK
& Company
FOR IMMEDIATE RELEASE
June 4th, 2018
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
The biggest news in a week of good news was employment and unemployment. The national unemployment rate fell to 3.8%. This rate ties April 2000 for the lowest rate of unemployment since 1969. It fell because more people got jobs than came back to the labor market. But, both grew. This created opportunities for almost everyone. Black unemployment fell to a record low. The spread between black and white unemployment fell to a record low. Teen unemployment continues to decline as did the rate for less educated workers.
Employment grew by 223,000 in May exceeding expectations. Job gains were across the board with the largest gains (in terms of percentage change) over the past year coming from natural resources, construction and manufacturing. In absolute terms, the largest gains were in professional and business services, educational and health services, trade, transportation and utilities and construction.
Despite all of this, wage growth remains under control. Wages are 2.7% higher than a year ago. The last time the unemployment rate was this low (April, 2000), wages were growing at 4.0%. There are several possible reasons for this. First, productivity is lower than in 2000. This gives employers more negotiation room as does lower inflation. Second, employers are replacing higher paid retiring veteran workers with lower paid new workers.
In addition, the labor force participation rate is likely to increase form the very low levels experienced over the years since the Great Recession. This is especially true for those over 65 and those 25-35 who had trouble finding jobs (see chart below). Now, if you don’t have a job, you probably don’t want one. This could help keep wage growth more under control. Despite this, there is likely to be upward pressure on wages and inflation over the next year.
Overall, the economy is moving ahead on all cylinders. All sectors are participating. We are looking at late in the cycle data yet no major problems have arisen. It’s a great picture.
U.S. Snapshot:
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As discussed above, the unemployment rate in May fell to 3.8%. This ties the lowest level seen in almost 50 years.
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Employment grew by 223,000 in May. This compares to an average of 191,000 over the past 12 months. It is exceptional given the current unemployment rate.
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Consumer confidence rose by 2.4 points in May. The index now stands at 128.0 compared to 125.6 in April and 117.6 a year ago. As can be seen by the chart below, it remains at a very high level.
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Total construction spending in April stood 7.6% above year ago levels and 1.8% over March. Both private and public sectors did well.
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Corporate cash flow as of the first quarter of 2018 was 14.9% above year earlier levels.
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Personal income in April was up 3.6% (at an annual rate) over March and stood 3.8% over year earlier levels. Disposable personal income was up at a 5.1% annual rate in April when compared to March and stood 3.9% above a year ago. Personal consumption expenditures were up at a rapid 7.1% annual rate for the month and stood 4.7% above a year ago. As a result, the savings rate fell to 2.8% from 3.7% a year ago.
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The ISM’s manufacturing index rose to 58.7 in May. This was up from 57.3 in April and 56.5 a year ago. It indicates that the manufacturing sector continues to expand.
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According to the S&P/Case-Shiller home price index, national home prices were up 6.5% above year earlier levels in March. They were up 0.8% over February.
Arizona Snapshot:
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According the above mentioned home price index, home prices in Greater Phoenix rose 6.8% over the year ending March and were up 0.9% over February.
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Enplanements were up 0.8% from a year ago at Sky Harbor International Airport for the year ending April. Deplanements were up 0.4%. Total traffic was up 0.6%. This represents a slowdown in traffic that is likely to be transitory.
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
480-423-9200
