Steady Growth, Waning Workers & The Price of Petrol

GOOD GROWTH

17Q4 is shaping up to be surprisingly strong, with US GDP growth possibly as high as 3% for the third straight quarter. Employment growth is solid, auto sales are down but still strong, construction spending is good, surveys of manufacturers are profoundly positive, and inflation remains pleasantly subdued. Globally, Europe continues to surprise to the upside, and Japan is doing better than at any time in at least 3.5 years.

WORKERS WANTED

While December’s net job growth of 148,000 was slightly disappointing, it’s understandable given the dearth of unemployed workers. The unemployment rate for African Americans hit 6.8%, its lowest level since record keeping began in 1972, and the rate for Hispanics/Latinos at 4.9% is one-tenth of a point from tying its 2006 all-time low. Moreover, the labor force participation rate for workers 25-54 rose to 81.9%, tops since 2010.

LONGER LABOR

In another sign the labor market is tightening, average overtime in October and November was 4.5 hours/week, tops since mid-2014; up substantially from 4.2 during the first five months of 2017. Back in 2014, OT was elevated out of a fear the economic recovery would stall. Now, there simply aren’t enough people to hire. For example, in November there were 210,000 job openings in construction, up from 178,000 in 11/16.

PETROLEUM PRICES

Oil prices have, somewhat surprisingly, more than doubled since 1/1/16. OPEC and Russia have cut supply by two million bbl/day, random outages and steadily declining Venezuelan production have helped, and geopolitical concerns (Iran) have pushed up prices. The biggest factor, however, is brisk global demand due to faster growth, despite US oil production that will soon hit a record 10 million bbl/day.

FEWER FIRMS

After setting records in 2015 and 2016, car sales slipped 1.8% in 2017, the first decline since the recession. One reason, the huge number of three-year old leased cars that are off-lease. The price gap between those vehicles and new ones: $14,200, up from $10,500 in 2010. 12% more cars will come off-lease in 2018 compared to 2017. Add rising rates, and 2018 car sales will be good; not great.

DWELLING DINEROS

In the District of Columbia, 17.3% of all houses are worth more than $1,000,000. California follows at 13.6%, with Hawaii in third at 13.5%. Rounding out the top six are New York at 7%, Massachusetts at 5.2%, and Connecticut at 4.5%. No other state exceeds 4%. At the other end, 0.8% of homes in Alaska exceed $1,000,000, in Wisconsin it’s 0.7%, in Iowa 0.6%, and in Indiana it’s just 0.5%.

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