Fed Forecast, Exuberant Employment & The Mauling of Malls

FEISTY FED

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.

INCREASING INFLATION

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.

TOPNOTCH TOIL

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.

OVERWHELMING OPENINGS

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!

RETAIL REDUCTION

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.

PRICEY PINT

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.

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