Consumer Sentiment Research Notes

by Jim Baird on February 24, 2017

CaptureSentiment dips in February, but remains near decade high

The University of Michigan Consumer Sentiment Index edged up to 96.3 from 95.7 earlier in the month. Economists had expected a more modest increase.

The index remains below its January cyclical peak of 98.5, but indications are still that U.S. consumers are – on average – still quite upbeat, with sentiment surging since the November election.

Underlying that result though are indications of a much more divided country, as self-defined Democrats are exceptionally pessimistic about the potential negative effects of President Trump’s agenda, offset by the exuberance of survey respondents identifying themselves as Republicans. Independents are, as a result, effectively breaking the tie and are also maintaining a more positive demeanor.

The other underlying dichotomy that is not apparent in the headline index number is the divergence between consumers’ views of current conditions, which remain exceptionally upbeat, and future expectations, which waned moderately in the last month.

With the focus shifting from campaign promises and philosophical goals, consumers may be acknowledging the difficult task ahead for the Trump administration to actually advance his agenda. With still more questions than answers on what will ultimately be signed into law, the timing and degree of impact on the economy is also in question. To a limited degree, the growing acknowledgement of political reality means the bloom may not be off the rose, but it’s certainly withered a bit.

All things considered though, the story is a positive one. Upbeat consumers, fueled by income gains and consistently solid growth in jobs, have both the capacity and optimism to expand their spending habits and provide a solid base for the broad economy to continue to grow

Jobless Claims (week of 2.18.17) Research Notes

by Jim Baird on February 23, 2017

CaptureWeekly claims edge higher; 4-week average falls to multi-year low

Initial claims for unemployment insurance remained very low for the week ended February 18, increasing by 6,000 to 244,000, above consensus expectations for 240,000.

Despite that increase, the four-week moving average of jobless claims dipped by another 4,000 to 241,000, a new low point in the current cycle and close to its lowest point in four decades.

A weekly jobless claims level below the 300,000 mark is generally indicative of a healthy labor market. This morning’s release marks the 103rd consecutive week that jobless claims have come in below that threshold – the longest such streak since 1970, when the American workforce was considerably smaller.

This high-frequency litmus test of the labor market reinforces the continued strength in the jobs market that has been characterized by low layoffs, increasing job openings, and solid growth in nonfarm payrolls. In addition, growing evidence of stronger wage growth is a positive development for consumers, supporting household spending growth.

Last month, payrolls surged to start the year, blowing past consensus estimates with broad-based gains across the private sector. Nonfarm payrolls rose 227,000, lifting the three-month average to 183,000. The persistently low level of claims data bodes well for the February jobs report, with nonfarm payrolls poised to increase. With that survey also being conducted this week, all indications are that job creation remains solid, underscoring the resiliency of the nearly eight-year economic recovery.

Coupled with rising inflation pressures, continued tightening in labor market conditions are likely to nudge the Fed to raise policy rates another quarter point in the near term. Most expect that move to come at the FOMC’s May policy meeting, although a March hike cannot be ruled out.

As a solid “real-time” indicator of the overall strength of the economy, the low level of layoffs bodes well for near-term growth, and continued strength in labor market conditions bodes well for consumer spending.

Special Commentary

February 16, 2017

Executive Summary ​Rising interest rates late in 2016 took a toll on bond prices, and were the catalyst for one of the worst quarters for bonds in recent decades. Current expectations are for interest rates to move gradually higher in 2017. While rising rates can be a headwind to bond performance in the near term, […]

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Market Perspective (February 2017)

February 16, 2017

Executive Summary ​Domestic equities extended their post-election rally in January, with all major benchmarks gaining ground. International stocks outperformed their domestic counterparts in January, earning positive returns in local currency terms as well as benefitting from a foreign exchange tailwind created by a weakening dollar. Most fixed income indices were modestly positive, with those more […]

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January Retail Sales Research Notes

February 15, 2017

Retail sales up 0.4% in January; CPI surge of 0.6% the largest monthly gain in four years Retail sales increased by 0.4% in January, easily surpassing expectations for a modest 0.1% increase. Excluding auto sales, which were quite soft in January, retail sales grew at a strong 0.8% clip. December retail sales were also revised […]

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Consumer Sentiment Research Notes

February 10, 2017

Sentiment slips in February, but remains near decade high The University of Michigan Consumer Sentiment Index declined in February to 95.7 from 98.5 in the month prior, falling well short of consensus expectations for the month. Despite that dip, the Index remains near its highest point in the past decade – evidence that, on the […]

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January’s Employment Situation Research Notes

February 3, 2017

Job creation surges in January to 227,000 Employment conditions remained on track in January, as job creation surged beyond consensus expectations to 227,000 – the best monthly tally since last July. Revisions to November and December drained 39,000 from prior estimates, but the net increase for the month still exceeded expectations by about 13,000. The […]

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Jobless Claims (week of 1.28.17) Research Notes

February 3, 2017

Jobless claims fall to 246,000, remaining near multi-decade low Initial claims for unemployment insurance fell to 246,000 for the week ended January 28, down 14,000 from the previous week’s revised tally of 260,000. The 4-week moving average edged higher to 248,000, but remains near its cyclical low reached a week ago. Markets will undoubtedly view […]

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January’s Consumer Confidence Research Notes

January 31, 2017

Consumer confidence dips modestly in January from 15-year high The Conference Board’s measure of consumer confidence fell modestly in January to 111.8, decreasing from last month’s revised reading of 113.3. The result fell short of economist expectations for a more moderate decline. The modest reversal in what had otherwise been a strong upswing in confidence […]

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Q4 GDP Research Notes

January 27, 2017

U.S. economic growth slows to 1.9% in Q4 The advance estimate of GDP released revealed that the U.S. economy grew at a 1.9% pace in the fourth quarter, moderately undershooting the consensus expectation of 2.2%. Although widely expected, this morning’s release represents a notable deceleration in growth from the third quarter’s robust 3.5% rate. Consumer […]

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