The Economy at a Glance

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» Employment
Total U.S. nonfarm employment grew in June for the 45th consecutive month as 288,000 jobs were created, accelerating from the 224,000 jobs that were created the previous month. Noteworthy, June’s tally marked the fifth straight month that job gains have topped 200,000, the first such stretch since September 1999 to January 2000. Job totals were revised upward for the previous two months by a combined 29,000. In June, the private sector expanded for the 52nd consecutive month, adding 262,000 jobs, while the government sector gained 26,000. The unemployment rate, which has fallen in eight of the last 12 months, dipped 0.2 percentage points to a 71-month low of 6.3 percent and was 1.4 percentage points below its 7.5 percent rate of a year ago. With only 81,000 workers entering the labor force in June, the labor force participation rate held steady for the second straight month at 62.8 percent, which matches a 36-plus-year low. The number of planned job cuts by U.S. companies plunged in June by over 40 percent and by more than 20 percent from a year ago. Moreover, the year-to-date number of jobs cuts by U.S. companies was 5 percent fewer than those announced in the first six months of 2013 and was the second-lowest first-half total since the end of the recession behind 2011.
Total nonfarm payroll employment expanded for the 45th consecutive month, increasing by a robust 288,000 in June, accelerating from the 224,000 jobs that were created the previous month. Moreover, June’s tally marked the fifth straight month that job gains have topped 200,000, the first such stretch since September 1999 to January 2000. The job figures for April were revised upward from 282,000 to 304,000, while those from May were revised upward from 217,000 to 224,000. Job growth during the 45-month expansionary streak has averaged approximately 189,000 jobs per month. Economists believe that approximately 125,000 jobs must be created per month just to keep up with new workers entering the workforce. Led by job gains in professional and business services (+67,000), retail trade (+40,000), food services and drinking places (+33,000), health care (+21,000), transportation and warehousing (+17,000), financial activities (17,000), manufacturing (+16,000), and wholesale trade (+15,000), private-sector payroll employment increased for the 52nd straight month, rising by 262,000 in June after gaining 224,000 the previous month. Approximately 9.9 million jobs have been created in the private sector over the last 52 months. Meanwhile, government employment has declined in 31 of the last 49 months, although it added 26,000 jobs the previous month and has grown in two of the last three months. Over this 49-month period, government employment has fallen by about 1.1 million. The economy (both the private and government sectors) for the first time has fully recovered the 8.7 million total jobs lost between the start of the recession in December 2007 and February 2010 plus has created an additional 400,000.

Falling in eight of the last 12 months, the unemployment rate in June dipped to a 71-month low (lowest since July 2008), dropping 0.2 percentage points to 6.1 percent and is down 1.4 percentage points below its 7.5 percent rate of a year ago. The underemployment rate (a.k.a. U-6 unemployment rate), a measure of labor underutilization which accounts for part-time workers due to economic reasons as well as discouraged job seekers, declined for the fifth time in the last six months, falling to a 68-month low of 12.1 percent and was down 2.1 percentage points from a year ago.

With the household survey showing that only 81,000 workers entered the labor force in June, the labor force participation rate, the share of working-age people in the labor force held steady for the second straight month at 62.8 percent, which matches the lowest level since Jimmy Carter was president over 36 years ago (March 1978) when the country was in the midst of stagflation. The aging of America, a modest jobs recovery from the last recession which has kept workers in school longer, and the rising number of workers on disability insurance are theories offered to explain the fall in the labor participation rate since it peaked at 67.3 percent in 2000.

The number of long-term unemployed (jobless for 27 weeks and over) fell from 3.4 million to 3.1 million, representing 32.8 percent of the unemployed population. Since April 2010, the number of long-term unemployed has fallen by about 3.6 million, and in the last year, by approximately 1.2 million.

The Labor Department reported that the average work week for production and nonsupervisory employees on private nonfarm payrolls was unchanged in June at 33.7 hours for the third straight month after jumping 0.3 hours in March from a 38-month low. Year-over-year, hours were unchanged as well.

Challenger, Grey & Christmas reported a plunge in the number of planned job cuts by U.S. companies in June following a two-month spike. In June, planned jobs cuts plummeted 40.6 percent to 31,434 after rising 54.0 percent over the previous two months and were down 20.2 percent from its level of a year ago. At the midpoint of 2014, planned job cuts total 246,034, which is 5.0 percent fewer than the 258,932 job cuts announced in the first six months of 2013. The year-to-date figure is the second-lowest first-half total since the end of the recession behind 2011, when 245,806 job cuts were announced from January through June. The heaviest downsizing through the first half of the year occurred in the computer industry, where employers announced plans to cut 30,002 workers from their payrolls. Retailers have also seen heavy job cuts, having announced 26,863 planned layoffs through June. John A. Challenger, CEO of Challenger, Gray & Christmas said, “It is also important to understand that not all of these job cuts are related to the economy. Retailers, in particular, are vulnerable to constantly changing trends in fashion, technology, and consumer demand. Retail, in general, continues to grow. But it is an increasingly competitive space where we could see more failures than successes. The same could be said for the tech sector. Obviously, this is an area with a huge potential for growth. After all, we are more and more reliant on computers, software and other technology every day. However, change in this industry occurs rapidly, and some of the larger, less nimble companies are sometimes forced to alter their course and that can be painful. This was exemplified by large layoff announcements in the first half of this year by Hewlett-Packard and Intel.”


Economic Indicators 
» Business Activity
GDP contracted in Q1 for the first in three years, or 12 quarters. GDP fell at an annual rate of 2.9 percent in Q1, while the previous two quarters saw growth of 2.6 percent in Q4 and 4.1 percent in Q3, which had marked the fastest pace of growth in seven quarters. However, economists say the weak showing in Q1 was largely the result of some temporary headwinds, including the cold winter, weak exports, and reduced inventory-building. Additionally, there is optimism that the drag on growth last year from higher taxes and deep federal spending cuts has been diminishing. Improvements in business activity have been widespread as industrial production has hit a record high in six of the last eight months and has increased in 46 of the last 59 months, the service sector has expanded 53 straight months, and durable goods orders increased year-over-year in May for the 46th time in the last 53 months. Conversely, the Small Business Optimism Index receded from an 80-month high (highest since September 2007) after declining for just the second time in the last eight months. However, despite the recent rally prior to June, the Index at 95.0 remained below readings that have normally been associated with expansion and below its pre-recession average of 100 from 1973 through 2007.
According to the second estimate, real gross domestic product or GDP (the output of goods and services produced within the U.S.) declined at an annual rate of 2.9 percent in the first quarter, marking the first time in 3 years, or 12 quarters, that GDP contracted. The two previous quarters saw growth of 2.6 percent in Q4 and 4.1 percent in Q3, which had marked the fastest pace of growth in seven quarters. Economists say the weak showing in Q1 was largely the result of some temporary headwinds, including the cold winter, weak exports, and reduced inventory-building. Additionally, there is optimism that the drag on growth last year from higher taxes and deep federal spending cuts has been diminishing. Consumer spending was affected by the adverse weather, growing at just a 1.0 percent annual rate, down from 3.3 percent in the fourth quarter. That gain was dominated by a 1.5 percent rise in spending on services, reflecting higher utility bills and an expansion in health care spending from provisions of the Affordable Care Act. Conversely, business investment fell 1.8 percent, and spending on equipment tumbled 2.8 percent. Residential investment decreased 4.2 percent following a 7.9 percent drop in the fourth quarter, which marked the first declines in home construction spending since the third quarter of 2010. Exports declined 8.9 percent as growth slowed in Europe and China. Also, inventories were a drag on growth by nearly 1.7 percentage points as businesses reduced stockpiling after aggressively replenishing shelves in the previous quarter. Total government spending fell just 0.8 percent, an improvement from the fourth quarter's 5.2 percent decline. Federal government spending ticked up 0.6 percent, the first increase since 2012's third quarter as budget cuts eased.

Rising in six of the last seven months, the Industrial Production Index jumped to a record high, increasing 0.7 points in May to 103.7 and was up 4.7 points from a year ago. Additionally, the Index has risen in 46 of the last 59 months since bottoming at 83.5 in June 2009.

Following a three-month increase, new orders for manufactured durable goods fell in May, declining 0.9 percent sequentially but rising 2.7 percent from a year ago, marking the 46th year-over-year increase in the last 53 months. Excluding the volatile transportation component (aircraft orders), durable goods orders decreased sequentially for just the second time in the last nine months, retreating a slight 0.1 percent in May.

The service sector grew (exceeding 50 on the ISM Non-Manufacturing Index) for the 53rd month in a row, with the pace of growth decelerating in June for the first time in four months. In June, the Index decreased 0.3 points to register at 56.0, but it was 2.6 points higher than its level of a year ago.

Although up in six of the last eight months, the Small Business Optimism Index receded from an 80-month high (highest since September 2007) in June, dropping 1.6 points to 95.0, but was 1.5 points above its level of a year ago. Despite the recent rally prior to June, the Index remained below readings that have normally accompanied an expansion and below its pre-recession average of 100 from 1973 through 2007. NFIB Chief Economist said, “The only two index components that increased in June were labor market indicators: the percent of owners with job openings and the percent planning to create new jobs in the coming months. While reports of actual net job creation per firm were positive, consumer and business owner optimism remain low, with both spending growth and sales expectations weak. This means there are more jobs but not much more output. With election day months away and no sign of change in Washington, economic growth for the rest of the year will continue to be sub-par. The unemployment rate will fall more due to people leaving the labor force than to jobs being created and fewer hands making GDP.”


Economic Indicators 
» Consumer
Consumer spending, representing roughly 70 percent of U.S. economic activity rebounded a modest 0.2 percent in May following a flattish April. The rebound in spending was boosted by a jump in auto sales and higher income. Auto dealers reported their best sales month in nine years, driven by brisk demand for SUVs and pickup trucks. Retail sales, which account for 30 percent of consumer spending, rose a steady 0.3 percent in May, and have risen in 14 of the last 18 months and a solid 4.3 percent from a year ago. The strongest gains came from motor vehicles and parts sales, up 1.1 percent sequentially, and building supplies and gardening equipment, which rose 1.4 percent sequentially. Boosted by promotions and discounts, the Thomson Reuters Same Store Sales Index advanced year-over-year for the 58th consecutive month with the Index growing year-over-year in June at the second fastest pace in three years. Furthermore, the Consumer Confidence Index jumped to a six-plus year high (highest since January 2008) after advancing in five of the last seven months; however, with the Index registering at 85.2, it remained below the 90.0 level that is considered to be a healthy reading.
Consumer spending, up in 54 of the last 61 months, rebounded a modest 0.2 percent in May following a flattish April. U.S. consumers stepped up their spending slightly in May, boosted by a jump in auto sales and higher income. The last two months followed a robust spending surge of 0.8 percent in March. The broader trend is regarded as strong enough to propel the economy after a dismal start to the year. Last month, spending on durable goods jumped 0.7 percent, a big rebound after having fallen 0.9 percent in April. In May, auto dealers reported their best sales month in nine years, driven by brisk demand for SUVs and pickup trucks. Sales of nondurable goods rose 0.2 percent in May after a stronger 0.4 percent April gain, while spending on services such as rent and utilities increased a modest 0.1 percent.

Personal income, a key pillar of consumer spending, rose in May for the 14th time in the last 16 months, advancing by a strong 0.4 percent after rising a solid 0.5 percent the previous month. Furthermore, it has risen in 47 of the last 55 months and 3.5 percent year-over-year. With incomes rising faster than spending, consumers were saving more, pushing the saving rate to 4.8 percent in May from 4.5 percent the previous month.

U.S. retail and food services sales, up sequentially in 14 of the last 18 months and 34 of the last 45, increased in May, rising 0.3 percent after rising 0.5 percent the previous month. Additionally, retail sales were up a solid 4.3 percent from a year ago and have sustained year-over-year increases for 55 consecutive months. Excluding motor vehicles and parts, retail sales rose only 0.1 percent in May compared with a 0.4 percent increase the previous month. The strongest gains came from motor vehicles and parts sales, up 1.1 percent sequentially, and building supplies and gardening equipment, which rose 1.4 percent. Also, sales of furniture and home sales rose 0.5 percent. But sales fell for retailers selling electronics and appliances, food and beverages, health and personal care supplies, clothing, sporting goods, and books. Restaurants and bars also reported lower sales. Overall, a steady upward trend in retail sales since January has provided growing evidence that the economy is emerging from a harsh winter with some momentum.

For the 58th consecutive month, the Thomson Reuters Same Store Sales (SSS) Index increased year-over-year with growth accelerating in June for the third time in the last four months. The Index advanced at a 5.1 percent clip in June, which marked the second fastest year-over-year pace in three years (since June 2011). Three percent year-over-year growth generally indicates health among U.S. consumers, and the Index has grown at least as much in 31 of the last 44 months. Retailers faced difficult sales comparisons from June last year, and still managed to pull strong results driven by discounts. These promotions continued into July as retailers clear up their inventory just in time for the Back-to-School season.

The Conference Board Consumer Confidence Index jumped to a six-plus year high (highest since January 2008) after advancing in five of the last seven months, increasing 3.0 points in June to 85.2 and 3.1 points from a year ago. A reading of 90 generally indicates a healthy economy, but despite recent gains the Index hasn't reached that level since the recession began in December 2007. The Present Situation Index increased to 85.1 from 80.3, while the Expectations Index rose to 85.2 from 83.5 in May. Director of Economic Indicators at The Conference Board said, “Consumer confidence continues to advance and the index is now at its highest level since January 2008 (87.3). June’s increase was driven primarily by improving current conditions, particularly consumers’ assessment of business conditions. Expectations regarding the short-term outlook for the economy and jobs were moderately more favorable, while income expectations were a bit mixed. Still, the momentum going forward remains quite positive.”


Economic Indicators 
» Financial
Rallying in 20 of the previous 25 months and establishing record highs in 12 of the last 14 months, major U.S. stock market indices rallied in June for the fifth straight month. As the weather has improved from a severe winter, there was more encouraging news about hiring and manufacturing. Additionally, company earnings, already at record levels, continued to grind higher. Even an escalating conflict in Iraq that pushed up oil prices wasn't enough to stop stocks from rising. The Dow Jones Industrial Index, up in 20 of the last 25 months, rallied 0.7 percent in June, while the S&P 500 index, up in 21 of the last 25 months, rallied a stronger 1.9 percent. In the bond market, 10-year treasury yields edged up in June for just the second time in the last six months, rising by 6 basis points in June to close the month at 2.52 percent. Yields remain historically low, likely reflecting the Federal Reserve’s bond purchase program (although it has been dialed back by $10 billion per month) as well as its near zero-interest rate policy, investors’ ongoing concerns about the strength of the economic recovery, and modest inflation. Demand for credit strengthened for small businesses in Q1 for the 10th time in the last 13 quarters, while it strengthened for medium to large businesses in Q1 for the 11th time in the last 13 quarters. Credit standards for small businesses eased in Q1 for the 14th time in the last 15 quarters, while they eased for medium to large businesses in Q1 for the 16th time in the last 17 quarters.
Rallying in 20 of the last 25 months and establishing record highs in 12 of the last 14, major U.S. stock market indices rebounded for the fifth straight month in June. Investors continued to brushed aside data showing weak first quarter economic growth, which was tied to severe winter that hampered exports and hit investment spending. As the weather has improved, there was more encouraging news about hiring and manufacturing. Additionally, company earnings, already at record levels, continued to grind higher. Even an escalating conflict in Iraq that pushed up oil prices in June wasn't enough to stop stocks from rising. The Dow Jones Industrial Index (DJI) rallied 0.7 percent in June, hitting a record high during the month, and was up in 20 of the last 25 months and 12.9 percent from a year ago. The S&P 500 Index, which hit a record high as well during the month, rallied a stronger 1.9 percent during the month and was up in 21 of the last 25 months and 22.0 percent from a year ago.

10-year treasury yields edged up in June for just the second time in the last six months after climbing in December to a 17-month high (highest since July 2011). Yields rose 6 basis points in June to close the month at 2.52 percent, which was 112 basis points above its record low rate of 1.40 percent established near the end of July 2012. Also, bond yields remain low by historical standards, reflecting the Federal Reserve’s monthly bond-purchase program ($45 billion of U.S. treasuries and mortgage-backed securities purchased in June) as well as its near zero-interest rate policy, investors’ ongoing concerns about the prospects for a strong economic recovery, subdued inflationary environment, and overhang and uncertainty from the European sovereign-debt issue. Amidst global uncertainly and turmoil, U.S. Treasuries remain the world’s favored refuge by investors.

In its last meeting, the Fed stated that it will maintain the target range for the federal funds rate at 0 to 1/4 percent for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2.0 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored. The Fed has maintained the target range for the federal funds rate at 0 to 1/4 percent for 45 consecutive periods, which dates back to December 2008. Also, in its last meeting, the Fed said that it would reduce its monthly bond purchases to $35 billion from $45 billion, as expected, keeping it on track to end the program as soon as October

According to the Senior Loan Officer Survey, the net percentage of banks tightening credit standards for small businesses fell in Q1 2014 by 4.2 percent, marking the 14th time in the last 15 quarters that credit standards have eased for small businesses. The recent easing for small businesses has stood in strong contrast to the previous 14 quarters in which credit standards tightened in every quarter but one. Medium to large businesses have faced an easing of credit standards in 16 of the last 17 quarters with a net 13.7 percent facing an easing of credit standards in Q1. Demand for credit by small businesses as well as medium to large businesses improved as compared to the previous quarter. Demand for credit by small businesses strengthened by 14.1 percent in Q1 and has improved in 10 of the last 13 quarters. Demand for credit by medium to large businesses has strengthened in 11 of the last 13 quarters, improving 16.4 percent in Q1, the fastest pace of improvement since a 19.1 percent clip in Q1 2013. An easing of credit standards or rise in demand for credit by businesses may signal faster economic growth.


Economic Indicators 
» Housing
For the second straight month home sales rebounded from a recent cooling trend as both existing and new home sales rose from the previous month. Existing home sales jumped to a seven-month high in May but were down year-over-year for the seventh consecutive month following 29 straight months of year-over-year increases. Sales of new homes rose soared to a six-year high, jumping over 18 percent in May and were up nearly 17 percent from a year ago. While home sales have benefited from steady job creation, rising rental rates, and historically low mortgage rates, issues related to limited inventory, higher home prices, and an abnormally cold winter had created headwinds for existing home sales in early 2014. 30-year fixed rate mortgage rates have increased in 11 of the last 18 months but hover just 81 basis points above December 2012’s record low of 3.35 percent. Tight inventory over the last year has kept the month supply of existing homes for sale near January 2013’s seven-plus year low. Although home prices advanced in April for the 19th time in the last 25 months and were up nearly 11 percent from a year ago, they remained over 17 percent below their April 2006 peak.
Rising in just three of the last nine months after soaring to nearly a six and a half year high (since March 2007) during the July to August period, existing home sales edged jumped to a seven-month high in May. In May, existing home sales rose 4.9 percent to a seasonally adjusted annual rate of 4.89 million but were 5.0 percent below its annual rate of a year ago. This marked the seventh consecutive month that sales were beneath year-ago levels after 29 consecutive months of year-over-year increases. The National Association of Realtors® (NAR) chief economist said, “Home buyers are benefiting from slower price growth due to the much-needed, rising inventory levels seen since the beginning of the year. Moreover, sales were helped by the improving job market and the temporary but slight decline in mortgage rates.”

Month’s supply of existing homes based on the current sales rate declined in May for the first time in five months and hovered only 30.2 percent above January 2013’s seven-plus year low (since May 2005 near the peak of the housing boom). Total housing inventory at the end of May climbed 2.2 percent to 2.28 million existing homes available for sale, which represents a 5.6-month supply at the current sales pace, down 1.8 percent from 5.7 months in April but up 12.0 percent from 5.0 months a year ago. Unsold inventory is 6.0 percent higher than a year ago, when there were 2.15 million existing homes available for sale but 46.8 percent below the record of 4.04 million in July 2007.

New home sales soared to a six-year high (highest since May 2008), jumping 18.6 percent in May to an annual rate of 504,000 and were up 16.9 percent year-over-year. May’s annual rate was 81.3 percent above August 2010’s record low annual rate (since 1963) of 278,000. The number of building permits issued for new housing units retreated in May from April’s 70-month high (highest since June 2008). The number of permits dropped 5.1 percent in May to an annual rate of 1,005,000, and was down a slight 0.5 percent from a year ago.

Since sagging to its cyclical low of 134.07 in March 2012, the S&P/Case-Shiller Home Price Index has advanced in 19 of the last 25 months. In April, the Index edged up 0.9 percent to 168.71 and was up 10.8 percent from a year ago, but it was 17.6 percent below its April 2006 peak and remained mired at nine-plus year levels (below July 2004 levels).

Average monthly rates on a 30-year fixed rate mortgage have rallied in 11 of the last 18 months but edged down in June for the second consecutive month. 30-year mortgage rates fell a marginal 3 basis points in June to 4.16 percent but were 9 basis points higher than a year ago and 81 basis points higher than when they bottomed out at a record low rate (since 1971) of 3.35 percent in November and December of 2013. A record low had been established 14 times over the last 43 months and in 13 of the last 34 months. Since 1971, the 30-year fixed rate has been below 4.0 percent in only 17 months, and those have all been in the past 30 months.


Economic Indicators 
» Inflation
The Consumer Price Index (CPI) jumped 0.4 percent on a monthly basis, the largest monthly increase since February 2013. The food index posted its largest increase since August 2011, with the index for food at home rising 0.7 percent. The increases in the electricity and gasoline indexes led to a 0.9 percent rise in the energy index. The annual rate climbed from 2.0 to 2.1 percent, which was 1.1 percentage points above last October’s four-year low and just above the Fed’s 2.0 percent target rate that is considered to be moderate. The Core CPI (removing volatile prices of food and energy) rose by 0.3 percent on a monthly basis and ticked up on an annual basis from 1.8 to 2.0, just 0.4 percent above February’s 33-month low. In June, energy prices rallied as gasoline prices increased for the seventh time in the last eight months, while crude oil prices increased for just the fourth time in the last 10 months. Stable energy prices, subdued annual CPI, tame core inflation, and below normal utilization rates for physical capital should continue to temper inflationary concerns, enabling the Fed to keep interest rates at historically low levels for some time to stimulate economic growth. Following a two-month rally, the Baltic Dry Index (a barometer of ocean freight shipping costs) declined in June for the third straight month and was down over 27 percent from a year ago.
The Consumer Price Index (CPI) rose 0.4 percent on a monthly basis in May, the largest monthly increase since February 2013, after increasing 0.3 percent the previous month. The food index posted its largest increase since August 2011, with the index for food at home rising 0.7 percent. The increases in the electricity and gasoline indexes led to a 0.9 percent rise in the energy index. On an annual basis, the Index climbed from 2.0 percent to 2.1 percent, just above the Fed’s 2.0 percent inflation target and 1.1 percentage point above last October’s four-year low. The Core CPI Index, which removes the effects of volatile food and energy prices, increased by 0.3 percent in May after edging up by 0.2 percent the previous month, while the annual rate rose from 1.8 to 2.0 percent, 0.4 percent above February’s 33-month low. The shelter index increased 0.3 percent in May, and the index for lodging away from home rose 2.0 percent and has increased 4.0 percent over the last three months. The index for airline fares rose sharply in May; its 5.8 percent increase was the largest since July 1999.

The Producer Price Index (PPI) dropped on a monthly basis after surging the previous two months, decreasing 0.2 percent in May after rising by 1.1 percent combined over the previous two month. In May, a 1.1-percent decrease in margins for machinery and equipment wholesaling accounted for about half of the decline in prices for final demand services, while gasoline prices, which fell 0.9 percent, accounted for about half of the decline in the final demand goods index. On an annual basis, the Index declined from 2.1 percent to 2.0 percent, 1.5 percentage points above last April’s 42-month low and well below the cyclical peak of 7.1 percent that was reached in July 2011.

The capacity utilization rate, effectively the employment rate of physical capital in the manufacturing, mining, and utilities industries, ticked up near March’s 70-month high, increasing by 0.2 percentage points in May to 79.1 percent. Although the capacity utilization rate has risen in 38 of the last 59 months, and was 1.2 percentage points higher than prior year, it remained below the long-term average (from 1972-2013) of 80.1 percent; and thus, is not stoking near-term concerns of inflation.

Energy prices rallied June as gasoline prices increased for the seventh time in the last eight months, while crude oil prices rose for just the fourth time in the last 10 months. Gasoline prices rose 0.3 percent in June and were up 5.9 percent from a year ago, while crude oil prices rose 2.6 percent in June and were up 11.3 percent from a year ago. In the final week of June, WTI crude oil spot prices averaged $106.69 per barrel, and retail gasoline prices in the U.S. averaged $3.78 per gallon.

In June, the Euro strengthened against the U.S. dollar for the ninth time in the last 13 months, up 0.2 percent, while the Pound strengthened against the U.S. dollar for the 10th time in the last 13 months, up 1.7 percent. Year-over-year, the Euro and Pound strengthened against the U.S. dollar, up 4.9 percent and 12.0 percent, respectively. At June close, 1 Euro yielded 1.36 U.S. dollars, and 1 Pound, 1.70 U.S. dollars.

Following a two-month rally, the Baltic Dry Index (BDI), which measures the daily average of prices in the spot market to ship raw materials in bulk, retreated for the third month in a row, dipping 9.0 percent in June and 27.4 percent from a year ago.


Economic Indicators 
  Economic Indicators    Expand All  
 
      Indicator Latest Trend Date
» Employment
Unemployment Rate6.1%7/3

The unemployment rate for all civilian workers represents the number of unemployed as a percent of the civilian labor force. To qualify as unemployed, a worker must be actively searching as well as physically able to work, but unable to find employment in the previous 4 week period.


Underemployment Rate12.1%7/3

The U-6 unemployment rate is an alternative measure of labor underutilization to the widely referenced U-3, or official unemployment rate. The U-6 rate includes the total unemployed as counted in U-3, plus all persons marginally attached to the labor force (those who would like to and are able to work but have not looked for work in the past year), plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force. 


Non-Farm Payrolls288K7/3

Nonfarm payroll employment is a monthly estimate of the number of paid employees working full-time or part-time in U.S. business and government agencies.  Trends in this figure are considered an indicator of strength and direction of the U.S. economy: increases indicate a growing economy and decreases point to a slowing or contracting economy.


Challenger, Gray, & Christmas - Layoffs Survey31K7/3

A monthly report published by outplacement firm Challenger, Gray, & Christmas on the number of announced large company layoffs. This report can help gauge the strength of the job market, which can be useful in gauging the strength of the overall economy.


Weekly Labor Hours33.77/3

Average weekly hours of production and nonsupervisory workers on private nonfarm payrolls is tracked monthly by the Bureau of Labor Statistics. A rise in weekly labor hours reflects an increase in labor utilization of those employed.


» Business Activity
Gross Domestic Product-2.9%6/25

GDP is the broadest measure of economic activity. Reported quarterly, GDP growth is the percent change in annualized total economic output. The major elements measured by GDP include consumption, investment, net exports, government spending and inventories. One popular definition of a recession is two consecutive quarters of negative percentage change in GDP, although this is not a hard and fast rule.


Industrial Production103.76/16

The Industrial Production (IP) Index, which is tracked by the Federal Reserve Board, measures the real output of the manufacturing, mining, and electric and gas utilities industries. The reference or base period for the index is 2007 at a level of 100. These aforementioned sectors are highly sensitive to interest rates and consumer demand; and thus, industrial production can be an important indicator for forecasting future Gross Domestic Product (GDP) and economic performance.


Durable Goods Order2.7%7/2

Durable Goods Orders primarily measures business spending on products expected to last more than three years such as machinery and computer equipment. The year over year change in order levels is a gauge of future growth for the manufacturing industry and a predictor of GDP growth. A subset of the data, nondefense capital goods orders, is considered a good indicator of business investment spending.


ISM Non-Manufacturing Index56.07/3

This is a composite indicator of three factors (employment trends, prices and new orders) in industries outside of manufacturing such as agriculture, construction, transportation, and retail trade. An index value above 50 signals a favorable increase in these factors and a value below 50 signals an unfavorable decrease.


Small Business Optimism Index95.07/8

This is a monthly index based on a survey of small business owners regarding 10 factors including their future plans for hiring, capital investment, and inventory building, as well as their expectations for future sales, profits, economic trends and credit market conditions. It is a broad indicator of current business conditions in the small business sector.


» Consumer
Consumer Spending0.2%6/26

A measure of monthly goods and services purchased by household consumers. The dollar figure represents an annualized, seasonally adjusted level of consumption. The percent change from month to month indicates growth (if positive) or contraction (if negative) in household consumption – a major component of GDP.


Retail Sales4.3%6/12

An estimate of monthly sales for retail and food service firms, based on a random sample of 5,000 companies. The monthly figure is adjusted for seasonality and holiday/trading day differences, and we record the percentage change from the current month compared with the same month a year ago as indicator of trends in discretionary consumer spending.


Thomson Same Store Sales Index5.1%7/10

The monthly SSS index provides a snapshot of U.S. consumer spending relative to expectations ahead of the monthly comps reporting cycle. The index tracks 29 retailers across a variety of specialties, including discounters, department, apparel, teen/kids, and drug stores. Costco® currently has the strongest weighting in the index after Wal-Mart® ceased reporting monthly same store sales results in April 2009.


Personal Income0.4%6/26

A measure of income received from wages and salaries, dividends and interest, rental income, and other business sources. The percent change from month to month indicates growth (if positive) or contraction (if negative). Personal income, a key pillar of consumer spending, tends to display a rising trend during periods of economic expansion, and show a stagnant or slightly declining trend during recessionary times.


Consumer Confidence Index85.26/24

This index is based on a survey of households regarding current and future business and employment conditions, as well as expectations for future income. It indicates consumers’ level of optimism and can affect their likelihood to make purchases – a major component of GDP. A declining trend in this index may indicate a slowdown in consumer spending and a slowdown in economic growth.


» Financial
S&P 5001.9%6/30

An index containing 500 American stocks (primarily large cap) across a range of industries, representing approximately 75 percent of the total value of the U.S. stock market. The S&P 500 is the most widely watched index of large-cap U.S. stocks and is considered to be a bellwether for the U.S. economy.


Dow Jones Industrial Average0.7%6/30

A blue-chip index containing 30 of some of the largest and most widely held stocks in America, representing approximately 25% of the total value of the U.S. stock market. The Dow Jones Industrial Average is one of the most popular indexes used to track the health of the U.S. equities market.


13-Week Treasury Bills0.02%6/30

T-Bills are short term U.S. government issued securities that mature in one year or less from their issue date. They are considered to be a nearly credit risk-free investment given their negligible default risk.


10-Year Treasury Notes2.52%6/30

Treasury notes are sold at regularly scheduled public auctions. The competitive bids at these auctions determine the interest rate paid on each Treasury note issue. Usually, bond market investors are forward-looking and this means interest rates on Treasury securities will move in the direction of Fed policy with a lead. As a result, one is more likely to see rising interest rates on Treasury yields during an expansion (and falling yields during economic slowdowns) in advance of policy changes by the Federal Reserve. Generally, stock prices and bond yields (interest rates) move inverse of each other.


Federal Reserve Rates0.25%6/18

The Federal Open Market Committee consists of the seven Governors of the Federal Reserve Board and five Federal Reserve Bank presidents. The FOMC meets eight times a year in order to determine the near-term direction of monetary policy. These meetings occur roughly every six weeks and and can be one of the most influential events for the markets. The interest rate set by the Fed, the federal funds rate, serves as a benchmark for all other rates.


Tightening/(Easing) of Credit-4.2%5/5

The Senior Loan Officer Opinion Survey on Bank Lending Practices addresses changes in the supply of C&I (Commercial and Industrial) loans to businesses. The results reported are based on responses from 60 domestic banks and 24 U.S. branches and agencies of foreign banks. Positive percentages represent a net tightening of credit, while negative percentages represent a net easing. An increase in the net percentage of banks tightening credit standard reflects a decrease in the supply of credit available to businesses to finance business operations (payrolls and inventories) and expansion (plant/equipment and mergers/acquisitions); and thus, may signal slower economic growth.


Demand for Credit14.1%5/5

The Senior Loan Officer Opinion Survey on Bank Lending Practices addresses changes in the demand for C&I (Commercial and Industrial) loans to businesses. The results reported are based on responses from 60 domestic banks and 24 U.S. branches and agencies of foreign banks. Positive percentages represent a net strengthening of demand, while negative percentages represent a net weakening. A rise in demand for credit reflects an increase in financing needs for business operations (payrolls and inventories) and expansion (plant/equipment and mergers/acquisitions); and thus, may signal faster economic growth.


» Housing
Existing Home Sales4.89 mil6/23

This is an annualized, seasonally adjusted figure based on the number of existing home and condominium sale transactions that closed during the month. Month to month changes are considered a good measure of demand in the residential real-estate sector.


Existing Home Inventory5.6 mo.6/23

This is an annualized, seasonally adjusted figure based on the number of existing home and condominium sale transactions that closed during the month. Month to month percentage changes are considered a good indicator of activity trends in the housing market. The months supply figure represents the number of months required to sell all current existing home inventory at the current pace of sales activity. The lower this figure, the greater the need for new housing starts and construction activity.


S&P / Case-Shiller Home Price Index168.716/24

The S&P / Case-Shiller Index is a monthly index that tracks home price trends in 20 major markets across the country. Prices shown are not seasonally adjusted.


New Home Sales504K6/24

This is an annualized, seasonally adjusted figure based on the number of new single family home transaction commitments (e.g. sales for which an agreement was signed) during the month. The level of monthly sales is considered a good indicator of activity trends in housing. Together with existing home sales, trends in housing activity can act as a leading indicator for consumer purchases of household items such as appliances and furniture.


Building Permits1,005K6/25

The Building Permits Survey (BPS) produces estimates of the number of permits issued for new housing units each month. The level of permits issued, which is shown at a seasonally adjusted annualized rate, is considered a good leading indicator of future trends in housing.

 


30-Year Fixed Rate Mortgage4.16%6/30

The 30-year fixed rate loan is the most common loan in the lending markets, and the 30-year interest rate is a good measure for the availability of credit to eligible borrowers in the home lending market. Changes in the mortgage rate impact both the level of new and existing home sales with a few months of lag time.


» Inflation
Consumer Price Index2.1%6/17

The Consumer Price Index is a measure of the average price level of a fixed basket of goods and services purchased by consumers. The CPI is divided into two measures, with the ‘core’ rate excluding volatile food and energy costs. The year/year change in core CPI is seen by most economists as the best measure of the underlying inflation rate. The Federal Open Market Committee (FOMC) implements monetary policy to help maintain an inflation rate of 2.0 percent per year. Historically, inflation has averaged about 3.0 percent per year.


Producer Price Index2.0%6/13

The Producer Price Index measures a basket of finished goods purchased by businesses to sell to consumers. The PPI is used as an early indicator of inflation, since it gives some insight into the costs incurred by businesses to produce their goods and services. The most important indicator is the underlying core PPI number, which excludes volatile food and energy prices.


Capacity Utilization79.1%6/16

The Federal Reserve Board constructs estimates of capacity and capacity utilization for industries in manufacturing, mining, and electric and gas utilities. For a given industry, the capacity utilization rate is equal to an output index (seasonally adjusted) divided by a capacity index. Effectively, it is the employment rate for physical capital. When the economy is healthy, total capacity utilization should be near 80.0 percent. The long-term average rate from 1972 through 2013 is 80.1 percent. If it gets up close to 85 percent it is a serious sign that the economy is overheating and that inflation will soon be a very serious issue. Therefore, capacity utilization beyond a certain threshold may signal inflation is on the rise.


Fuel Prices0.3%6/30

The Energy Information Administration publishes a weekly survey of fuel prices gathered from a sampling of service stations across the country. The association also publishes weekly WTI crude oil spot prices per barrel.


Currency - Euro & Pound (GBP)0.2%6/30

The chart below shows the exchange rate of the U.S. Dollar with the Euro and British Pound. The vertical axis shows the number of U.S. dollars equal to one Euro and Pound. When the graph is falling, the dollar is strengthening, since it takes fewer dollars to purchase one euro. When the graph is rising, the dollar is weakening. The strength of the dollar is an important economic indicator as a strong dollar generally means bad news for American companies as their products will be more expensive in relation to foreign competitors, but good news for consumers as a stronger dollar results in lower prices for imported goods and services.


Baltic Dry Index (BDI)-9.0%6/30

The Baltic Dry Index is a daily average of prices in the spot market to ship raw materials in bulk. It represents the cost paid by an end user to have a shipping company transport raw materials across seas on the Baltic Exchange, the global marketplace for brokering shipping contracts. The Baltic Exchange is similar to the New York Mercantile Exchange in that it is a medium for buyers and sellers of contracts and forward agreements (futures) for delivery of dry bulk cargo. This index can be used as an indicator of the direction of overall global economic activity because it measures the changing demand for shipping capacity (which is generally limited and increases very slowly over time); consequently, small changes in demand can lead to much larger changes in shipping rates. The BDI can also be a good indicator of the future direction of inflation.



© 2014 Insperity


Disclaimer: The information being provided in the Economy at a Glance is an informational service of Insperity and is drawn from several governmental and other agencies. The information is provided as is and Insperity makes no representation regarding it or its accuracy.