Clarksville, TN – The economic data were mixed, but generally consistent with moderately strong economic growth in the near term. Motor vehicle sales rebounded in April, from what appears to have been an Easter-related decline in March.
The ISM surveys split; manufacturing a bit softer, non-manufacturing a bit stronger. Nonfarm payrolls rose by 160,000 in the initial estimate for April, below the median forecast (+200,000), but not horrible (note that the economy added 1.057 million jobs before seasonal adjustment).The unemployment rate held steady at 5.0%, but labor force participation and the employment/population ratio both declined (don’t read too much into that, there’s a fair amount of noise in these figures and the trends are higher).
Average hourly earnings rose 0.3%, up 2.5% from a year ago, still relatively lackluster, but the fear is that tighter job market conditions will lead to further upward pressure on wages.
As usual, financial market participants paid little attention to the productivity numbers. These data can be a bit squirrelly, but the underlying trends are worrisome. Specifically, output per hour fell at a 1.0% annual rate in the preliminary estimate for 1Q16, up 0.6% y/y (productivity has risen at a 0.5% annual rate over the last five years).
Productivity growth is the key to an improving standard of living, the financing of Social Security and Medicare, the inflation outlook, and corporate profits. Unit Labor Costs (the key measure of inflation pressure from the job market) rose at a 4.1% annual rate in 1Q16 (+2.3% y/y). If firms cannot pass higher Unit Labor Costs along, they will eat into corporate profits.
Next week, the economic calendar thins out, with the important figures arriving on Friday. Retail sales should post a strong gain in April, boosted by the rebound in vehicle sales and higher gasoline prices.
|Last||Last Week||YTD return %|
Consumer Money Rates
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|Last||1 year ago|
|Dollars per British Pound||1.449||1.524|
|Dollars per Euro||1.141||1.135|
|Japanese Yen per Dollar||107.26||119.46|
|Canadian Dollars per Dollar||1.285||1.204|
|Mexican Peso per Dollar||17.893||15.361|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||2.46||2.71|
Treasury Yield Curve – 05/06/2016
As of close of business 05/05/2016
|May 10||—||Small Business Optimism (April)|
|May 12||—||Jobless Claims (week ending May 7)
Import Prices (April)
|May 13||—||Producer Price Index (April)
Retail Sales (April)
|May 17||—||Consumer Price Index (April)
Building Permits, Housing Starts (April)
Industrial Production (April)
|May 18||—||FOMC Minutes (April 26-27)|
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The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business May 5th, 2016.