Jobless Claims (week of 5.9.15) Research Notes

by Jim Baird on May 15, 2015

CaptureJobless claims decline modestly; 4-week average at 15-year low

Initial jobless claims fell modestly to 264,000 for the week ended May 9, slightly below the previous week’s print of 265,000. This week’s result pulled the four-week moving average down to 271,750.

At recent levels, jobless claims suggest that layoffs remain low and job market conditions are positive and improving.

From a historical perspective, the four-week moving average has seldom been below 280,000, putting the recent pace of layoffs in noteworthy territory. That threshold was last breached fifteen years ago.

Strong jobs data conflicts with other recent data that have suggested that the economy has been in a soft patch in recent months, even as jobs data has remained largely constructive. Conditions are reminiscent of early 2014, when the economy flatlined in Q1 even as payrolls were expanding.

The consumer appears to be relatively cautious, as evidenced by tepid retail sales in recent months, despite the potential tailwind of lower gasoline prices, which was expected to provide a potential boost for other discretionary spending. Thus far, households have seemingly been content to pocket that additional cash.

Nonetheless, strong consumer confidence supported by labor market strength should be positive supports for household spending and ultimately overall growth.

Broadly, recent economic data has provided something for everyone; there’s data to suggest that the economy has stalled and other data that points to an economy that continues to press forward, albeit at a sub-par pace.  At this point, expectations are for growth to accelerate in the coming months, although consumers will need to play a key role.  Stronger income gains would go a long way toward supporting confidence and spending.  Whether we are at the threshold of that or not remains an unanswered question.

April Retail Sales Research Notes

by Jim Baird on May 13, 2015

CaptureRetail sales flat in April

Retail sales were flat in April, falling short of expectations for a modest 0.2% rise. Sales excluding motor vehicles managed a modest gain of 0.1%. March retail sales were revised upward to 1.1%.

Weak sales gains coincides with other data that suggests that the economy has been in a soft patch in recent months. It also suggests that consumers – despite relatively strong confidence – are maintaining a tight grip on household spending budgets.

A few factors may help to explain the lack of growth in sales. Inflation remains quite low, which is a headwind to stronger sales growth, as sales are reported in nominal terms and are not adjusted for inflation. In addition, the timing of the Easter holiday this year may have pulled more seasonal sales forward into March.

Retail sales tend to be correlated with income growth. Recent data may suggest some improvement on the wage front, but it is still too early to declare definitively that a sustained upward move in wage growth has taken hold.

The sustained decline in gasoline prices has long been expected to provide some extra cash to fuel discretionary consumer spending, but that hasn’t happened. Consumers appear to still have a preference for savings over consumption, although the personal savings rate did decline in March for the first time in four months.

While retail sales mostly disappointed and consumer spending growth fell sharply during the first quarter, the consumer sector was still a relative bright spot in the first quarter GDP report. The negative impact of inclement weather may have played a role in slower consumption growth in the first quarter, but with winter now behind us, further disappointment in retail sales growth cannot be attributed to weather conditions.

The bottom line is that measures of the consumer mood may seem rosy, but actual consumer spending behavior in recent months has been restrained.

Consumer Sentiment Research Notes

May 1, 2015

Consumer sentiment rises in line with expectations in April The University of Michigan Consumer Sentiment Index increased in April, coming in at 95.9, matching expectations for the month and confirming a moderate increase from the March index reading of 93.0. Those surveyed indicated that they have become more optimistic in general in the past month […]

Read the full article →

Market Perspectives (April 2015)

April 14, 2015

Executive Summary March brought continued volatility to global markets, though overseas equities continued to outperform the S&P 500 year to date.  Despite this volatility, stocks ended the quarter in positive territory. U.S. large cap stocks declined while mid cap performance was relatively flat amid declining corporate earnings growth, uncertainty over the timing of future Fed […]

Read the full article →

Economic Perspectives (First Quarter 2015)

April 14, 2015

The economy appears to be off to a sluggish start this year, in part due to the collapse in oil prices and the strength of the dollar.  Still, the economy is growing, and should be supported by confident U.S. consumers with some pent-up ability to spend. Read the full article>>

Read the full article →

March’s Employment Situation Research Notes

April 3, 2015

Job creation falters in March; jobless rate steady at 5.5% Job market conditions faltered in March as the economy created only 126,000 jobs. The advance was roughly half of the expected gain of 250,000 new jobs, and was well below February’s revised figure of 264,000. Coupled with the downward revisions of 69,000 to January and […]

Read the full article →

March’s Consumer Confidence Research Notes

March 31, 2015

Confidence rebounds in March on stronger expectations The tone was a bit more optimistic in March, as the Conference Board Consumer Confidence Index was lifted by improving expectations for the economy.  The index rose to 101.3 from an upwardly revised 98.8 in February. Confidence spiked at the beginning of the year as gas prices plummeted […]

Read the full article →

Market Perspectives (March 2015)

March 30, 2015

Executive Summary February was a good month for equities, as all major U.S. indices erased their January losses and ended the month in positive territory for the year. International stocks continued to perform well for the month, extending their positive January results and maintaining their year-to-date advantage over domestic stocks. Bond markets have experienced greater […]

Read the full article →

Q4 GDP Research Notes

March 27, 2015

Q4 GDP estimate unchanged at 2.2% Today’s GDP report confirmed the economy grew at a 2.2% annualized pace in the fourth quarter, unchanged from the prior estimate. For the year, the U.S. economy grew at a 2.4%. This revised data confirms that growth softened late last year on the heels of growth in excess of […]

Read the full article →

February’s CPI Research Notes

March 24, 2015

CPI unchanged over past 12 months; oil prices stabilize in February As anticipated, the Consumer Price Index rose 0.2% in February, as energy prices stabilized during the month after an extended period of monthly declines. For the last year, the CPI edged out of negative territory and was effectively unchanged. Core inflation, which eliminates volatile […]

Read the full article →