Economy Update For December 2018

Consumer Inflation

Inflation has dropped since November. In Sept ’18 we were at 2.3, Oct rose to 2.5, November dipped to 2.2, and now we’re hovering around an expected 2.0.

However, as a special sidenote: It is likely that goods and house prices will continue to rise throughout the year. The National Association of Realtors (NAR) is anticipating that home prices will increase 4.8% overall in 2018 and 3.5% in 2019.

GDP

GDP in Q3 is at 3.4, down .1 from the last reading in November (which was 3.5).

For comparison, it was an amazing 4.2 in Q2, and 2.2 in Q1. So we’re still seeing amazing gains and an overall good economy.

Wages and Salaries

Real earnings took a nosedive in Q4 2017, but they have since started to rebound.

In Q4 2017 they were 345 (1982 adjusted dollars). They are currently at 355 for Q3 2018.

Big news in the payroll employment growth, however. We were at 182 at year-end 2017. Now, we’re up to 312 at month-end December 2018. That’s a huge gain when you consider it is in the (000’s)!

Additionally, average hourly earnings for private-sector workers are up 11 cents in Dec, which is great because it’ll match inflation. Overall, it is only up 3.2% over the year – but still, we’ll take what we can get here.

Stocks

S&P 500 is still in the very slow, painful process of getting back up from the massive dropoff it had in Q4.

We’ll be watching it closely.

Unemployment

Unemployment in the US continues to hover around 4.0%. No expected deviations as of right now. It changed from 3.7 to 3.9 from November to December, which is typical in the calendar year cycle.

It is very low compared to the last couple of decades, so let’s hope it stays that way. Less unemployment, less crime.

Nonfarm payrolls increased by 312,000 in Dec, however. Mostly in health care, food services, construction, and manufacturing.

The reason the unemployment rose was because more people have actually been joining the labor market entirely, which is awesome news. Getting the underemployed and those who stopped looking back in the mix helps the economy as a whole, even though it looks like a negative indicator.

House Prices

Sadly, house prices rose 5% as tracked across 20 major cities over the year. Housing prices seem to continue to rise, outpacing everything else.

Maybe another crash is coming? I don’t see it likely with all the new regulations – but an adjustment is definitely needed at some point.

It’s just one man’s opinion, but I’d hold off on buying a house until we see a correction if you can.

Overall – Economy Update For December 2018

I’m pretty optimistic looking into 2019! As a reminder, in my last article I mentioned:

Typically, consumer spending increases dramatically as the holidays arrive. This will help numerous sectors that are lacking in the economy and help with the stock market rebound as consumer spending skyrockets

I doubt we’ll see much of a change in house sales going into the future, however. The rising interest rates by the Fed and constantly increasing prices are only going to drive down demand. Well, there may be demand but the people that want them can’t afford them.

It’s good news seeing real earnings up (more money for us!). And likewise good seeing unemployment down (less crime for us!).

Inflation does not appear to be slowing any. Hopefully this can be reined in during early 2019.

Overall, we’re at a solid spot right now. My prediction is that it is likely upward from here entering the rest of 2018.

I’m still hoping for that inflation to slow, but we’ll see. I’ll keep everyone posted each month as the data comes out

A survey done by forecasters anticipates a 1 in 5 chance of a recession occurring in 2019. This is never usually that high. Likewise, an even higher chance is anticipated for a recession occurring by 2020.

See the chart:

Keep your eyes on this going forward. It’s been jumping up pretty steadily since 2014. And we haven’t seen a major recession in quite awhile, we’re starting to come due for one.

I’m not entirely sure if it will be in 2019, but I’d nearly guarantee it by 2025. The economy is very cyclical, it will happen eventually. Just stay watching for the indicators.

Thanks for stopping by,

Avi