Consumer Inflation
No significant changes from last month in regards to inflation. We have seen some cost-push inflation though. This is where rising oil prices drive consumer prices higher, despite slowdowns in economic activity.
The oil change was unexpected, but the slowdown in economic activity was not. It’s post holidays – buying is down. Everyone spent all their money in December.
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 by 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.
The report for Q4 GDP has been delayed, so I won’t be able to report what that is until the feds get the data out.
Wages and Salaries
Real earnings took a nosedive in Q4 2017, but they have since started to rebound.
In Q4 2017 they were at $345 (1982 adjusted dollars). They then increased to $355 for Q3 2018.
Now? Well now they are up to $375.12 as of December 2018.
Earnings are up too! In Dec 2017 we had earnings at $10.75, now we’re seeing them at $10.87 as of Dec 2018.
Overall, it is only up a couple pennies and a dime 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.
It has been steadily climbing back up since Dec 24th. It’s about halfway back to pre-crash levels (depending on what you consider “pre-crash”).
As of today it is at $2681.05
Unemployment
Unemployment in the US continues to hover around 4.0%. No expected deviations as of right now. It changed from 3.9 to 3.8 from December to January, 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.
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.
House price growth moderated toward the end of 2018 and continued throughout January. But the gains remain substantial in some areas.
Overall – Economy Update For January 2019
Leading indicators are indicating slower economic growth in 2019 than we seen in 2018. Who knows if these indicators will actually be truthful, however.
Claims for unemployment insurance fell to a 50-YEAR low in the week ending on Jan 19. That is insane! And also a great sign of how the labor market conditions are doing, and how unemployment is being kept at an all-time modern low.
Some other interesting facts:
- Average S&P 500 rose .8% this week
- Average rate on a 10-year treasury note edged up to 2.75%
- 30 year mortgage rate is steady at 4.45%
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 from my last economy update for December article:
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
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