Alex Carrick, Chief Economist at ConstructConnectAlex Carrick is Chief Economist for ConstructConnect. He is a frequent contributor to the Daily Commercial News and the Journal of Commerce. He has delivered presentations throughout North America on the Canadian, United States and world construction outlooks. A trusted and often-quoted source for the media, Mr. Carrick holds a Masters in Economics. « Less
Alex Carrick, Chief Economist at ConstructConnectAlex Carrick is Chief Economist for ConstructConnect. He is a frequent contributor to the Daily Commercial News and the Journal of Commerce. He has delivered presentations throughout North America on the Canadian, United States and world construction outlooks. A trusted and often-quoted source for … More »
September 30th, 2019 by Alex Carrick, Chief Economist at ConstructConnect
Article source: ConstructConnect
The U.S. economic recovery and expansion has now lasted more than a decade, which is historically ‘long in the tooth.’ With each passing month, and despite how well the major stock market indices may be doing, worries about a slowdown or next recession become harder to suppress.
The following are some of the yellow flags pointing to potholes in the road ahead. When warranted, countervailing positives have been added.
(1) Running Out of Track for the Stimulus Train
At present, it’s the absence of something special to look forward to that is significant. Heading into 2018, executives throughout the U.S. were eagerly anticipating the steep cut in the corporate tax rate, from 35% to 21%, and several other business-friendly initiatives (i.e., incentives to repatriate money from overseas, etc.). There’s nothing implying a similar upbeat impact on the horizon today.
The Trump administration has floated the idea of a big middle-class income tax cut. A formidable stumbling block, however, has emerged. The estimated federal deficit in the current fiscal year, made worse by the corporate tax cut, will reach -$1 trillion. Washington’s total debt is -$22 trillion and climbing. Personal income tax relief would most likely further exacerbate an already troubling situation.
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Tags: Alex Carrick, brexit, capex, Deficit, Economic, Economics, Economist, Economy, geopolitical, interest rate, jobs, Labor, population drop, stimulus, Weather
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August 6th, 2019 by Alex Carrick, Chief Economist at ConstructConnect
Article source: ConstructConnect
Fed Becomes Erratic in Response to Unorthodox Economic Policy
After achieving +3.1% GDP growth in Q1, the U.S. economy stayed healthy in Q2 at +2.1%. In July, according to the latest ‘Employment Situation’ report from the Bureau of Labor Statistics (BLS), +164,000 net jobs were created in America, on top of a +193,000 gain the month before.
The unemployment rate continues to sit at an exceptionally low 3.7%. Inflation is a little less than +2.0% year over year. All in all, the U.S. economy is in extraordinarily good shape.
How is the Federal Reserve responding? It just lowered its key policy-setting interest rate by 25 basis points (100 bps = 1.00%). It has also suggested that further cuts are no sure thing.
Orthodox economic policy would see a strong U.S. economy raising other economies around the world. Orthodox policy would permit relatively free ‘goods’ flows internationally, resulting in better global trade and heightened demand for commodities. A ‘rising tide would lift all boats’.
Read the rest of U.S. Strong Jobs Growth in July Underlines Fed’s Erratic Interest Rate Move
Tags: Alex Carrick, ConstructConnect, Economic, Economic policy, Economics, Economist, Economy, Growth
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July 18th, 2019 by Alex Carrick, Chief Economist at ConstructConnect
Chinese Economic Slowdown
China’s latest quarter-over-quarter ‘real’ (i.e., after adjustment for inflation) gross domestic product (GDP) growth rate was its slowest since 1992. 2019’s second quarter advance, annualized, was only +6.2%. That level of increase anywhere else in the world would be greeted with celebration, but for China, it’s a relative crawl. While the +10% to +12% gains of the mid-00s have become a thing of the past, +7% or more has still been commonplace in the Middle Kingdom of late. The Chinese economy would greatly benefit from an end to its trade dispute with the U.S. which has seen sales to American consumers significantly curtailed by tariffs.
Meanwhile U.S. Economy Roars
At least with respect to employment, the U.S. economy continues to roar. One of the best indicators of the strength in the jobs market is the ‘weekly initial jobless claims’ data series. It measures first-time applications for unemployment insurance. The figure soars when the economy sinks. As Graph 1 shows, initial jobless claims in the middle of the 2008-2009 recession skyrocketed to 665,000. But they have now been less than 300,000 – i.e., the benchmark usually adopted to denote a solid jobs recovery – for 226 weeks in a row (i.e., more than four years). They even dropped below 200,000 twice in April of this year.
The length of time from high to low in the initial jobless claims curve has been 10 years, exactly corresponding with the duration of the current upbeat economic cycle. When searching for an early warning sign that the economy is faltering, be wary of initial jobless claims rising back to 300,000.
Read the rest of 7 Mid-July Economic Nuggets, With Emphasis on Jobs Markets
Tags: Alex Carrick, China, ConstructConnect, Economic, Economist, employment, Growth, Housing, market, material, money
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July 5th, 2019 by Alex Carrick, Chief Economist at ConstructConnect
Article source: ConstructConnect
Strong U.S. Jobs Growth has Interest Rate Implications
The U.S. total number of jobs in June shot up by +224,000, according to the latest Employment Situation report from the Bureau of Labor Statistics (BLS). A slight rise in the ‘participation rate’, to 62.9% from 62.8% in May, caused June’s unemployment rate to climb a notch, from 3.6% to 3.7%. A 3.7% level of unemployment is still remarkably tight.
Everyone’s keeping a close eye out for signs of a weakening U.S. economy that would warrant an interest rate cut by the Federal Reserve (Graph 1). They won’t find justification for such a move in June’s jobs numbers. May’s lackluster +75,000 addition had pointed to trouble possibly brewing, but that’s become old news. It’s been superseded by fresh buoyancy.
It should be pointed out, however, that the jobs performances in some sectors have taken an interesting turn of late. This will be examined in the next section.
Worth noting, also, is that despite June’s strength, average monthly job creation in the U.S. so far in 2019 has been +172,000. With half a year having already sped by, +172,000 is a decline of more than a quarter (-26.8%) compared with January-to-June 2018’s average of +235,000.
Read the rest of June Jobs Reports: U.S. Bounces Back; Canada Weak M/M but Strong Ytd
Tags: Alex Carrick, Canada, ConstructConnect, Construction industry, Construction services, Economist, Economy, employment, Growth, jobless, jobs
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June 28th, 2019 by Alex Carrick, Chief Economist at ConstructConnect
Article source: ConstructConnect
GDP’s Underpinning from Housing Starts Weakens
The housing starts numbers that analysts key on are monthly ‘actual’ figures, in units, that have been seasonally adjusted and annualized (i.e., extrapolated to yield a yearly total). The acronym for such a calculation is SAAR − i.e., seasonally adjusted at an annual rate.
Based on demographic factors (e.g., population growth and the rate of family formations), with consideration also given to the pace of demolitions, the annual level of new home groundbreakings in the U.S. should currently be about 1.6 million units. That would be ideal.
Instead, and as is apparent from Graph 1, the monthly U.S. SAAR figure has been mainly stuck near 1.3 million units for the past several years.
U.S. national housing starts through May of this year, 2019, have averaged only 1.238 million units SAAR, a decline of -5.5% versus the first five months of 2018. To place this in a historical context, there has not been a decline in the annual level of U.S. housing starts since 2009.
To further elaborate, a record-long ten-year expansion in the economy has been enabled by a similarly lengthy period of year-to-year positive changes in housing starts.
Sustained strength in new home construction is often a mainstay of GDP growth. When it is absent, nagging worries begin to surface about the economy’s ability to maintain good prospects.
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June 21st, 2019 by Alex Carrick, Chief Economist at ConstructConnect
Article source: ConstructConnect
well ask, since it went by so fast − there are the following economic nuggets from various private and public sector firms and agencies to be aware of and mull over.
Consumer Spending Becomes Lethargic
In the ‘second estimate’ of U.S. Q1 2019 ‘real’ (adjusted for inflation) gross domestic product (GDP) published by the Bureau of Economic Analysis (BEA), the quarter-to-quarter annualized pickup was a strong +3.1%. Consumer spending, however, which usually plays a major role in GDP’s advance, was relatively quiet this time around. The Personal Consumption Expenditures (PCE) line item of GDP was only +1.3% per annum. It was soundly beaten by Gross Private Domestic Investment, +4.3%, and an improvement in net foreign trade, with exports +4.8% and imports, -2.5%. Investment was led by spending on intellectual property products, +7.2%.
A shift towards lethargic consumer spending has also become apparent in recent retail sales figures. Total U.S. retail and food services sales in May were +3.2% year over year. Retail as a standalone was +3.1% and ‘food services and drinking places,’ +3.7%. Less than a year ago, in July 2018, retail sales were +6.2% y/y and ‘restaurant, fast food, bar, and tavern’ sales, +9.6%.
Retail Sales Mainly in a Range of +3.1 to +3.7% Y/Y
Within retail, and as set out in Graph 1, several shopkeepers achieved May sales increases ranging from +3.1% to +3.7% y/y. ‘Health care and personal care stores’ rang up receipts of +3.4% y/y; ‘general merchandise stores’, +3.3%; and ‘gasoline stations,’ +3.2%. Gasoline station sales, despite drawing more from aligned variety store activities, can still be heavily influenced by fluctuations in the price of petrol. In the latest month, the price of gas was flat compared with 12 months prior, and therefore had a neutral impact on cash register receipts at service stations.
Read the rest of Mid-June Economic Nuggets Focusing on Retail, Inflation and Housing Starts
Tags: Construction industry, consumer confidence, Economy, Retail sales
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June 13th, 2019 by Alex Carrick, Chief Economist at ConstructConnect
U.S. Jobs +75,000 in May, but Flat After Revisions
Article source: ConstructConnect
The latest Employment Situation report from the Bureau of Labor Statistics (BLS) records a gain of +75,000 in total U.S. jobs in May. The +75,000 month-to-month increase was the second lowest so far this year. February’s figure was worse at +56,000.
What’s hidden, however, unless one digs a little deeper, is the fact that total U.S. employment in May really didn’t increase at all. The total jobs number now being reported for May, at 151.095 million, is the same as the total jobs number that was published a month ago for April. The explanation lies in the fact that April’s number has been revised down by -75,000.
The national unemployment rate in May stayed extremely tight, at 3.6%, the same as in the previous April. The participation rate likewise remained steady, at 62.8%.
The composition of May’s +75,000 jobs performance was an interesting combination of only +8,000 in goods production, +82,000 in the private services-providing sector and -15,000 with government. The public sector’s jobs loss was at the state (-10,000) and local (-9,000) levels, as Washington made a minor upwards staffing adjustment (+4,000).
Read the rest of May’s Weakening in U.S. Jobs Growth and the Inverted Yield Curve
Tags: Alex Carrick, ConstructConnect, employ, employment, job, jobless, jobs, Labor, market
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May 30th, 2019 by Alex Carrick, Chief Economist at ConstructConnect
Article source: ConstructConnect
Table 1 sets out the latest published year-over-year and quarter-to-quarter ‘real’ (i.e., adjusted for inflation) gross domestic product (GDP) growth rates for the 50 U.S. states, plus District of Columbia. The data is made available by the Bureau of Economic Analysis (BEA).
The year-over-year comparisons on the left-hand side of Table 1 are based on 2018 versus 2017 results. The quarter-to-quarter comparisons on the right-hand side of the table are for Q4 2018 versus Q3 2018. The q/q percentage changes are compounded to the power of four, making them equivalent to annual growth rates. (The ‘real’ dollar volumes underlying the q/q percent change calculations have been seasonally adjusted.)
7 State GDP Growth Headliners
Above the first bold horizontal line in Table 1 are the 15 states that have performed best either year-over-year or quarter-to-quarter. Washington recorded the strongest GDP growth y/y, at +5.7%, while Texas ranked number one for q/q gain, at +6.6%.
Seven states were in the Top 15 for both y/y and q/q GDP growth rates. Those seven appear in green shading. They are: Washington, Idaho, Arizona, California, Colorado, Nevada, and Texas.
Read the rest of 7 Best and 7 Worst U.S. States for Y/Y and Q/Q GDP Growth
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May 28th, 2019 by Alex Carrick, Chief Economist at ConstructConnect
Article source: ConstructConnect
An ‘Overhang’ of Space in ‘Bricks and Mortar’ Retail
With jobs growth so strong and incomes rising, a main driving force behind the ten-year expansion in U.S. gross domestic product (GDP) has been consumer spending. Retail sales as a key component of consumer spending, however, have been taking quite a different path than in the past. Physical shopping outlets have been closing at a truly alarming rate, to be replaced by warehouses to fulfill purchases made over the Internet.
The construction industry welcomes the proliferation of distribution centers but laments the loss of ‘bricks and mortar’ retail building activity. Moreover, it’s not just the pullback in the square footage of retail space that is disappointing for construction. Just as big a problem is the ‘overhang’.
Vast amounts of empty space have been accumulating that will require years of gradually increasing occupancy to fill back up again.
U.S. Retail and Food Services Sales
When the 2008-09 recession was at its worst, U.S. total retail sales nosedived by nearly -13.0% year over year. As Graph 1 shows, U.S. retail sales then recovered in 2010 and 2011 to between +5% and +10% y/y. For the most recent seven-plus years, they’ve been mainly between 0% and +5%.
An often-quoted target for y/y ‘current dollar’ retail sales is +5%. After ‘normal’ inflation is factored out, +5% becomes +3% in ‘real’ terms, which provides healthy backing for GDP advancement.
Read the rest of Signs of Consumer Fatigue in U.S. and Canadian Retail Sales
Tags: food services sales, nonstore retailers, Retail sales, vehiicle retail
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May 20th, 2019 by Alex Carrick, Chief Economist at ConstructConnect
Article source: ConstructConnect
Inflation, Stock Markets and Interest Rates
The U.S. ‘all-items’ Consumer Price Index (CPI) in April was +2.0% year over year. The ‘core’ rate of inflation, which omits mainly food and energy items that display notable price volatility, was +2.1% y/y. It seems that inflation, at least for now, has become untethered from what is transpiring in the economy at large. A highly-charged jobs market and solid gross domestic product (GDP) growth aren’t causing the usual (i.e., pre-recession) ascending price effect.
Technological advances by leading firms in many industries have helped to keep price increases retrained. Examples include Amazon in retail; Uber in ride-sharing; and iPhones in photography.
The big economic issue at present is the escalation of America’s trade dispute with China. The major stock market indices, which were recovering nicely from setbacks in December, have lately been wobbling once again. Investors had the impression that a trade deal was imminent.
The Federal Reserve has come under criticism for paying more attention to the stock markets than the ‘real economy’ when setting its interest rate policy. Since inflation has been taken out of the equation, it will be interesting to observe what will prompt the next Fed interest rate move.
With the foregoing as backdrop, there are also the following nuggets to be gleaned from the latest public and private agency data releases. The soil is fertile and the crop abundant.
Read the rest of 8 Mid-May Economic Nuggets
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