Monday, August 20, 2018

Young Folks Are Finding Work

The unemployment rate among young Americans fell to its lowest level in more than 50 years this summer, the labor Department said last week. On the other hand, the share of young people looking for work remained well below its peak in 1989.

Among Americans between 16 and 24 years old who were actively looking for work this summer, 9.2 percent were unemployed in July. That's a drop from the 9.6 percent youth unemployment rate in July 2017. It was also the lowest midsummer joblessness rate for youth since July 1966.

Similarly, the unemployment rate among older Americans who don’t have a high-school diploma fell to a record low this year. The jobless rate also fell sharply for those who completed high school but never attended college.

Friday, August 17, 2018

The Outlook for Raises

The tight job market means that employers are willing to part with “slightly larger” pay raises when the calendar ticks over, according to a new survey by Willis Towers Watson. The 2018 General Industry Salary Budget Survey finds that U.S. employers intend to reward their non-management exempt employees with average pay increases of 3.1 percent in 2019; this year they handed out pay raises of 3.0 percent. Executives are in for slightly smaller raises, 3.1 percent compared with 3.2 percent.

Pay increases have lagged in the neighborhood of 3 percent for the past 10 years, though only 3 percent of companies intend to freeze salaries next year. The last year in which raises were significantly larger was back in 2008, when they were around 3.8 percent.

Companies are still rewarding “star” performers at a notably higher percentage than “average” performers. Those with top marks in their evaluations got an average raise of 4.6 percent in 2018; that’s 70 percent higher than average-rated employees, who got 2.7 percent raises.

Wednesday, August 15, 2018

A Strong July for Retail

U.S. retail sales rose a healthy 0.5 percent in July, the Commerce Department reported yesterday. The report came with one big caveat, though: The government also said sales in June rose a smaller 0.2 percent instead 0.5 percent as originally reported.

That means the increase in July was starting from a lower baseline. On the other hand, retail sales have increased 6.4 percent over the past 12 months, close to the long-run average since 1980.

Clothing stores and restaurants posted a 1.3 percent increase in sales to lead the way in July. Sales also rose 1.2 percent for department stores and 0.8 percent for both Internet retailers and gas stations. Sales fell for home furnishings, pharmacies and stores that sell sporting goods and other hobby-style items such as books and music.

Our Shrinking Debt Burden

The debt burden of U.S. households is the smallest it’s been in nearly 16 years. Household debt — including mortgages, credit cards, auto loans, student loans and other credit — grew for the 16th consecutive quarter in the three months ending in June, rising by 0.6 percent to $13.29 trillion, the New York Fed reported yesterday. But that's only half the equation.

On the other side, personal disposable incomes reached an annual rate of $15.46 trillion in the quarter. That means the debt-to-income ratio dipped to 86 percent. That’s the lowest, by a very small amount, that this figure has been since the fourth quarter of 2002.

But it's a long way down from where this number peaked. At the height of the credit bubble in 2008, household debts topped out at 116 percent of disposable income.

Tuesday, August 14, 2018

A Slight Slowdown in Consumer Expectations

A monthly survey conducted on consumer expectations showed a notable pessimistic trend in July. The New York Fed’s survey — based on a panel of 1,300 household heads across the United States — found declines in one-year expectations on earnings growth , household spending, stock prices and house prices. Some highlights:

  • Median one-year-ahead wage-growth expectations fell from 2.7 percent in June to 2.4 percent in July, dropping below the 2.5 percent to 2.7 percent range it had been in since November 2017
  • Median home price change expectations dropped from a recent high of 3.9 percent reached in June to 3.7 percent 
  • The probability that stock prices will be higher in a year fell to 40.3 percent, the lowest level since October 2016
  • Median household spending growth expectations decreased by 0.1 percent to 3.2 percent in July

Monday, August 13, 2018

What's Your Goal?

Protection or production? That is the key question for most investors' portfolios. According to a new report from a global research and consulting firm Cerulli Associates, more than three-quarters of investors explicitly state that they would prefer a protection-focused portfolio versus one that outperforms.

The desire for protection is very strongly correlated with age, although not necessarily the way you think it might be. The report finds that a protection mindset is highly concentrated among investors who are 60 and older - and among affluent investors under 30 years old.

There are similar strata involved for different wealth tiers. The highest concentrations of the protection-focused mindset are among those investors with $250,000 to $500,000 (83 percent) and greater than $5 million (80 percent).

Friday, August 10, 2018

Signs of Inflation in July

U.S. consumer prices rose by 0.2 percent in July, pointing to a steady increase in inflation pressures, according to figures out from the Labor Department this morning. In the 12 months through July, the Consumer Price Index increased 2.9 percent.

Excluding the volatile food and energy components, the CPI rose 0.2 percent, the same gain as in May and June. The annual increase in the so-called core CPI was 2.4 percent, the largest rise since September 2008.

Shelter costs were a big driver of this: Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 percent last month after increasing by the same margin in June. Overall, the so-called shelter index rose 3.5 percent in the 12 months through July. Prices for new motor vehicles rose 0.3 percent in July, apparel prices fell 0.3 percent, and healthcare costs fell 0.2 percent.