A Dozen Mid-May Economic Nuggets

The ‘U-4’ unemployment rate in the U.S. in April shrank to 4.4%. That’s the best U-4 has been in a decade, dating back to May 2007. U-4 is the ‘official’ or ‘standard’ unemployment rate. It’s the one almost always quoted in media reports. U-4 soared to as high as 10.0% in October 2009, just after the end of the Great Recession.


The ‘U-6’ unemployment rate now sits at 8.6%. U-6 is a much broader definition of the jobless level. It includes individuals only marginally attached to the labor force and those who are working part-time but who would prefer full-time positions.

Even according to the wider definition of unemployment, U.S. labor markets have improved greatly. U-6 topped off at 17.1% in the aftermath of the Great Recession. Ten years have passed since U-6 dipped to 8.0% and 16 years since U-8 managed a level as cheerily robust as 7.0%.

The Federal Reserve has achieved its job-creation goal and then some. Still, the road ahead for interest rate hikes may not be as clearly designated as might be supposed. There are too many potholes for certainty. Ongoing turmoil at the top branch of government in Washington further muddies the picture.

What follows are a dozen additional economic ‘nuggets’ to be gleaned from the latest government agency and private sector data releases.

(1) After recent hefty gains in the Conference Board’s index of consumer confidence, there was a minor downward adjustment in April to 120.3 from March’s 124.9. The base for the index is 1985 = 100.0. The mid-year of the 1980s has been judged a period of time in which Americans were neither giddily optimistic nor inordinately gloomy. The reason for the latest month-to-month drop has been attributed to a slightly dimmer view of prospects for the economy as a whole and in labor markets generally. Just the same, the level of the index at well above 100.0 indicates an ongoing level of confidence that is fairly bullish. All that has happened is that a little more caution seems to have cropped up.

(2) The Purchasing Managers’ Index (PMI) of the Institute of Supply Management (ISM) was above 50.0% for the eighth month in a row in April. But it did retreat a little, to 54.8% from 57.2% in March. The highest the PMI has been lately was 57.7% in February of this year. As long as the PMI is above 43.3%, − which it has been for 95 months in a row − the overall economy is expanding. When it exceeds 50.0%, manufacturing sector shipments are blooming rather than withering. History has established that the current reading for the PMI corresponds with ‘real’ (i.e., inflation-adjusted) gross domestic product (GDP) growth of +3.6%. 

(3) U.S. total retail and food services sales in April were +0.4% month to month and +4.5% year over year. While +4.5% y/y is pretty good, it doesn’t quite reach the +5.0% benchmark that indicates wage earners are ‘all in’ with respect to consumer spending. Some shopkeepers have been chalking up better sales than others. Because the price of petrol has been rising, gasoline stations sales are +12.3% y/y. In good news for the construction industry, the cash registers of ‘building material and garden equipment and supplies dealers’ are ahead by +9.3% y/y. But the major story continues to be what is happening with ‘non-store retailers’ (i.e., those companies specializing in on-line platforms and/or electronic auctions). Their receipts are +11.9% y/y.

(4) In the U.S. Northeast, the five major cities with the lowest unemployment rates at this time are: Boston (3.4%); Indianapolis (3.5%); Washington D.C. (3.7%); Columbus (4.0%); and New York (4.1%). The five cities recording the fastest year-over-year employment growth are: Columbus (+2.6%); Cincinnati (+2.1%); Detroit (+2.1%); Philadelphia (+2.0%); and Indianapolis (+1.7%). Notice that Indianapolis and Columbus appear in both listings. Also, it’s encouraging to see Detroit moving on from its former bankruptcy and out-migration problems to provide job creation that exceeds the national average (+1.6%). 

(5) In the U.S. Southeast, the big metro areas with the lowest unemployment rates in the spring of 2017 are: Nashville (3.6%); Orlando (3.9%); Richmond (3.9%); Jacksonville (+4.1%); Raleigh (4.1%); and Tampa (4.1%). The five with the best records of jobs growth are: Atlanta (+3.9% y/y); Nashville (+3.9%); Jacksonville (+3.7%); Orlando (+3.6%); and Tampa (+3.4%). Three cities appear in both listings – Nashville, Orlando and Jacksonville. Orlando is presently featuring theme park construction (Disney) and miles of highway work. By the way, Atlanta and Nashville are tied for first place among all U.S. MSAs for year-over-year jobs gains (+3.9%).

(6) In the U.S. Central Region, the five cities with the tightest unemployment rates are: Austin (3.6%); Milwaukee (3.7%); Minneapolis-St. Paul (3.8%); Oklahoma City (3.8%); and St. Louis (4.0%). Milwaukee may be commendable for its second-place jobless level, but it is one of the few cities in America that is falling behind in new hiring (-0.3% y/y). The Central Region urban centers with the speediest staffing increases are: Dallas-Ft. Worth (+3.8% y/y); Austin (+3.3%); Kansas City (+3.0%); San Antonio (+2.4%); and Minneapolis-St. Paul (+2.1%).

(7) The five cities in the West with the lowest unemployment rates are: Denver (2.4%); Salt Lake City (3.2%); San Francisco (3.5%); San Jose (3.6%); and Seattle (3.7%). Positions three through five of the foregoing listing are filled by west coast high-tech ‘hotbeds’. It should also be mentioned that Denver is the only MSA in the country with a jobless rate below 3.0%. The cities in the West where the new-jobs scenes are the frothiest are: Riverside (+3.8% y/y); Salt Lake City (+3.3%); Seattle (+3.2%); Las Vegas (+3.1%); Phoenix (+2.7%); and San Francisco (+2.7%). The surge in Las Vegas signals that Americans, after years of restraint, are embracing their amusement urgings with more enthusiasm.

(8) It also proves helpful to consolidate and condense the results in points (4) through (7) above. Among the nation’s 10 largest cities, by population, Boston (3.4%) and Washington (3.8%) stand out for their low unemployment rates. Chicago (4.5%) and Houston (5.7%) are notable for their high out-of-work percentages. As for year-over-year jobs creation, the two headliner cities among the country’s ten biggest are Atlanta (+3.9%) and Dallas-Ft. Worth (+3.8%). The two weakest performers, once again, are Houston (+1.0%) and Chicago (+0.8%).

(9) Canada’s six census metropolitan areas (CMAs) with populations of one million people or more each are being led by Montreal (+4.0% y/y) in job creation. Calgary, situated at the heart of Alberta’s embattled energy sector, is the surprising runner-up (+2.2%). Next in line are: Ottawa-Gatineau (+2.1%); Vancouver (+1.9%); and Toronto (+1.0%). Edmonton (-2.9%) is still shedding jobs. Unemployment rates – which are biased higher than in the U.S. on account of a different calculation methodology – range from 4.7% in Vancouver to 9.3% in Calgary. Lying in-between are Ottawa-Gatineau, 5.1%; Montreal, 6.6%; Toronto, 7.1%; and Edmonton, 8.4%.

(10) The latest numbers on U.S. oil imports have taken an interesting turn. They have shifted upwards by three-quarters of a million barrels per day, to 8.25 million through April of this year versus 7.52 million at the same time last year. So far in 2017, Canada has accounted for by far the largest share of U.S. oil imports, at 42%, with Saudi Arabia well back in second place, at 16%. But imports, in barrels, from Saudi Arabia have made a larger year-to-date percentage gain (+19%) than have Canadian supplies (+14%). Imports from Venezuela (with a 9% slice) are flat (+0.9%) year to date, while from Iraq (with a 7% share), they are +136%, or more than double. Mexico as a source of oil (also with a 7% share) has seen a cut in its shipments (-4%) to the U.S.

(11) In April, Canadian seasonally adjusted and annualized (SAAR) housing starts were better than 200,000 units for the fifth month in a row. But they did moderate to 214,000 units from March’s extremely ambitious 252,000 units. Through the first one-third of this year, residential groundbreakings north of the border have averaged 222,000 units per month (SAAR), a climb of +13% compared with January-to-April 2016’s 197,000 units. Among the nation’s six major cities, Montreal has recorded the largest percentage gain in home starts, +61%, followed by Ottawa-Gatineau, +50%. Calgary has also performed well, +33%; Edmonton and Toronto have been mildly positive at +11% and +9% respectively; and Vancouver has faltered, -20%.

(12) Toronto has now joined Vancouver in having government-imposed penalties in place to discourage potential foreign buyers from making local home purchases. The intent is to reduce ‘speculative’ demand and to blunt spikes in new and resale home prices. These newest hurdles follow on the heels of earlier measures to make mortgage approvals harder to obtain. The big worry is that when interest rates do eventually begin to head skyward in Canada, many deeply-indebted households may not be able to keep up with their monthly payment commitments.

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