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Chrisman's Corner: The Economy is Throwing Us, and Interest Rates, Some Twists

Last week was a short, due to the Memorial Day Holiday, but interesting data-intensive period of news reporting for the U.S. economy. The week began with a positive income and spending report for April and ending with a clunker of a jobs report for May. What is it telling JMAC’s brokers?

 Let’s take a look at the income and spending report from April. The numbers were solid and went along with stronger GDP growth after the real 1Q real GDP growth. Consumer spending also went up 1.0% which is strong. March was a weak month for auto sales at 16.6 million but it picked back up in April to 17.4 million. However, this doesn't change the fact that April is the 6th consecutive month since the trifecta of September, October, November which saw 18+ million unit sales. Many believe that this is further proof that auto sales have reached their cyclical peak.

 But of more interest to JMAC’s senior management is that housing prices continued to climb in March by 0.1%. An increase is always welcome but compared to the year to date rate of 5.2% increase, 0.1% feels small.

 The ISM Manufacturing Index figured indicated improving conditions for manufacturers but the ISM Non-Manufacturing Index took a hit. Initial claims for unemployment insurance fell slightly to reach 267,000 which is a very good number. But the non-farm payroll jobs increased by just 38,000 in May – a poor showing.

 This gain was well below expectations and is part of the reason why a June 15 Fed Funds rate hike is off the table. July 27th remains in play but there will need to be a rebound in employment in June data. On the bright side there was a moderate 0.2% increase in average hourly earnings reflecting tightening labor market conditions. The unemployment rate dropped to 4.7 percent as the labor force declined notice- ably, by 458,000 workers.

 What does the week’s numbers mean to our brokers? All indications point to continued low rates!