Fed Forecast, Exuberant Employment & The Mauling of Malls


The Fed’s recent short-term rate increase wasn’t surprising. What was somewhat unexpected was that the Fed now expects to raise rates four times this year, not three. But what set the markets into a slight tizzy was the hawkish tone of the post-meeting statement, suggesting that relatively soon the Fed may need to deliberately slow the economy with still tighter monetary policy.


While the CPI rose by a solid 0.2% in May, it rose by a strong 2.8% over the past 12 months, the fastest rise in Y-o-Y CPI inflation since 2/12 when it rose 2.9%. Core CPI, which excludes volatile food and energy and is thus a better inflation measure, rose 2.2% over the past year, its biggest Y-o-Y increase since 2/17. Inflation isn’t surging, but it’s steadily gaining incremental strength.


May’s employment numbers were excellent. The unemployment rate fell to 3.8%, a level last seen in 4/00! The unemployment rate for African Americans declined to 5.9%, the lowest level since record keeping began in 1/72, and the unemployment rate for women was 3.6%, its lowest since 1953! Lastly, the unemployment rate for those with less than a HS diploma hit 5.4%, a near record.


When the Great Recession ended, there were 14.6 million unemployed job seekers in the US, but just 2.2 million job openings. The seekers/openings ratio was a dismal 6.6. Today, there are just 6.3 million job seekers and an all-time high of 6.7 million openings. There are now more job openings than job seekers. The ratio is at an all-time low of 0.9! In theory, there’s a job for everyone!


Many retail stores are shrinking their footprint or declaring bankruptcy. In part, it’s because online sales have been rising by an astonishing 17%/year for two decades and are now 9% of all retail sales. Moreover, there are 24 square feet of retail space/person in the US; tops in the world. Canada has 17, followed by Australia at 11, then the UK and Japan at 4.5. More bricks-and-mortar pain ahead.


While beer sales will rise with temperatures, how much your sudsy relief costs will vary greatly depending upon beer excise taxes. In Wyoming, they are just $0.02/gallon, lowest in the USA, followed by Missouri and Wisconsin at $0.06/gallon. By contrast, try not to choke on your brew in Tennessee, where taxes are a whopping $1.29/gallon, highest anywhere. Alaska is a close second at $1.07/gallon. The median is $0.25/gallon.

Source: Elliot Eisenberg, PhD., Chief Economist for GraphsandLaughs, LLC, an economic consulting firm serving a variety of clients across the United States. All rights reserved.

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