Month: July 2018

By Thomas Cooley and Peter Rupert

Friday the BEA announced that the advance estimate for Q2 has real GDP increasing 4.1% at an annual rate. This is the largest increase since Q3 of 2014. Personal consumption expenditures (PCE) grew 4.0% after a weak Q1 at 0.52%. Moreover, PCE was the largest contributor to the growth at 2.69 percentage points. Note that the annual GDP revisions included a rebasing of the “real” GDP figures to a reference year of 2012 instead of 2009.

Private fixed investment was up 5.4% after increasing 8.0% in Q1. Real non-residential investment in structures grew 13.3% and residential fell, -1.1%. Since 1999 the changes in non-residential investment are uncorrelated with residential investment.

Exports were up 9.3% and imports 0.5% leading to a change in net exports of $52.4 bln.

The quarterly PCE chain-type price index increased 1.8% at an annual rate and ex-food and energy at 2.0%.

The BEA released personal income this morning with a 0.3% increase over the month in real terms after a weak April (0.1%) and May (0.2%).

The Bigger Picture

Although there were some downward revisions to the last three quarters of 2017 the strength of this report, in both output and prices, along with the strong June employment report, should not change the course of expected Fed rate hikes in their September and December deliberations. However, will we see some momentum to raise rates this week given that many expect Q3 growth to come in over 3%? Many observers think the Fed is now a bit behind the curve with price increases beginning to have some bite throughout the economy.

By Thomas Cooley and Peter Rupert

The BLS announced that total nonfarm employment increased by 213,000 in June with 202,000 of that from the private sector. Early forecasts were in the 195k range. In addition, April employment was revised up 16,000 and May 21,000. The only large decline occurred in retail trade, shedding 21,600 jobs. Since January, 2008, employment is about 9% higher and services has increased about 12%. Construction employment losses after 2008 were large and is now nearly back to the 2008 level. 

Average hours of work remained at 34.5 and average hourly earnings increased from $26.93 in May to $26.98 in June and up 2.74% since June of last year. In real terms, using the CPI, wages have not risen over the previous year as the CPI also increased about 2.7% since June of 2017.

The household survey showed that the employment to population ratio remained at 60.4, the labor force participation rate increased from 62.7 to 62.9, and the unemployment rate rose slightly to 4.05%.

The BLS also announced the newest Job Opening and Labor Turnover Survey, showing the level of vacancies fell slightly, from a revised 6.8 million to 6.6 million. Moreover, in nearly all regions the number of vacancies is about the same as the number of unemployed persons…although in the Midwest there are 326,000 more vacancies than unemployed persons.