ELLIOTT D. POLLACK
& Company
FOR IMMEDIATE RELEASE
June 10, 2019
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
The most significant economic story last week took place after markets closed on Friday. The threat of significant tariffs on Mexican products shipped to the U.S. unless Mexico helped slow the flow illegal immigrants apparently bore enough fruit that the Trump administration withdrew the threat, at least for now. Since 37% of the Mexican economy is based on net exports and we are their major trading partner, the outcome was no surprise. The resolution was, by any standards, rapid. That is good news for markets and border issues. It appears China will take a while longer to resolve.
Last week’s economic data was mixed. Employment growth in May was tepid though unemployment remained steady. Expectations for economic growth in 2019 were toned town a bit but 2020, while expected to be a slower year, is still expected to be up. Productivity was up. Both the manufacturing and non-manufacturing sectors continued to grow. Mortgage rates were the lowest since the summer of 2017. Construction spending was flat to down. In Greater Phoenix, the new and existing for sale housing market remained positive.
It’s late in the game and some imbalances are becoming more evident. But the game is certainly not over yet.
U.S. Snapshot:
Total nonfarm payroll employment edged up 75,000 in May. This was below expectations. Monthly job gains have averaged 164,000 thus far in 2019 compared to 223,000 in 2018. Given the number of unfilled jobs that exist, the issue seems to be the availability of labor. Indeed, average hourly earnings are up 3.1% over the last year. In addition, March and April employment numbers were revised downward by a combined 75,000. This is nothing to panic over but bears watching.
The unemployment rate in May remained steady at 3.6%.
The Blue Chip forecast of real GDP for 2019 was trimmed slightly from 2.6% to 2.5%. For 2020, the forecast was also slightly lowered to 1.8% vs 1.9% last month. Monetary policy is expected to be steady if not easing.
In the first quarter of the year, nonfarm business sector labor productivity increased 3.4%, output increased 3.9% and hours worked increased 0.5%. Productivity was up 2.4% from year earlier levels. These are positive numbers as businesses attempt to keep production up despite difficulties in finding labor.
The ISM’s non-manufacturing index was 52.1 in May. This compares to 52.8 in April and 58.7 a year ago. Any reading over 50 suggests expansion in the sector.
The ISM’s manufacturing index level was 56.9 in May. This is up from 55.9 in May and down from 58.9 a year ago.
Consumer credit continued to expand in April at a 5.2% annual rate and is now 5.3% over year-earlier levels. Nonrevolving credit expanded at a 4.2% annual rate and revolving credit was up at a 7.9% annual rate.
The 30-year fixed mortgage rate was at 3.82% last week. This is down from 3.99% the previous week and 4.10% a month ago. Long term mortgage rates are now at their lowest level in almost 2 years (see chart below).
Construction spending was flat for the month in April and is down 1.2% from last year.
Arizona Snapshot:
The number of active listings on the Greater Phoenix multiple listing service was up 3.8% from year-earlier levels in May but was down 5.5% from March. The number of resales was up 3.6% from a year ago and was up 8.3% from March. This suggests that the resale housing market continues to tighten.
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
