Despite a slowing national economy, international trade tensions and declining business and consumer confidence levels, the U.S. labor market has continued to grow at a respectable rate. Between January and November 2019, payroll gains averaged 180,000 jobs per month, about a fourth lower than the level experienced during the same period in 2018. These figures are especially impressive given that the national unemployment rate has remained below 4% for ten consecutive months. The tight labor market has led to increased wages, especially for those at the lower-end of the income spectrum where competition for workers remains fierce. Jobless claims remain historically low, but the number of layoffs in 2019 climbed as key retailers filed for bankruptcy and the trade war negatively impacted manufacturing.
*WTI Crude Oil Spot Price. Data points through end of December 2019. Change represents month-over-month change.
The U.S. economy grew at an annual rate of 2.1% in Q3 2019, in line with the pace from the previous quarter but down 80 bps from the same time in 2018. The U.S. consumer continues to be the backbone of the economic expansion with consumption in goods and services witnessing gains above their current cycle average. The slower pace of growth was mostly due to softness of growth in private investment and net exports. Private investment had witnessed the fastest pace since early 2013 in late 2018 but failed to sustain that pace in 2019. However, given the upbeat news in the tail end of 2019 the U.S. economy is expected to continue expanding at a moderate pace.
After flirting with new cyclical highs earlier in the year, consumer confidence stabilized through the final months of 2019, reaching 126.5 in December 2019. Although down from recent highs, the still-elevated consumer confidence readings point to positive but moderating economic growth through the near term.
Total retail sales growth remained resilient through November 2019, increasing by 0.2% from the previous month and 3.4% year-over-year, supported by steady job growth and improving wage gains. Highlighted by a buoyant, though shorter, holiday sales season, 2019 retail sales are set to surpass the previous year’s totals. This momentum will likely carry into the new year, as the recent de-escalation in U.S.-China trade tensions and diminishing threat of additional tariffs on consumer goods further support retail sales.
Demand for homes continues to be strong as long-term mortgage rates remain near historic lows. During the first week of the new year, the average 30-year fixed mortgage rate dipped to 3.72%, nearly 80 bps lower than it was a year ago. Favorable lending conditions have buoyed home sales in recent months which has continued to exacerbate the national housing shortage. In addition, the dwindling number of entry-level homes has made it much more difficult, or impossible, for first-time homebuyers to enter the market. Homebuilder confidence is at its highest level in 20 years, but the group is taking a much more conservative approach by building new homes at rate that is about half of the level recorded during the pre-GFC peak. In the coming months, the U.S. housing market will be supported by millennials taking advantage of lower interest rates, but home prices will continue to rise.
Please note that the content of this report is for informational purposes only and should not be viewed as investment advice or an offer or solicitation. Any opinions are solely those of the Strategy & Research Team of CBRE Global Investors and are subject to change without notice, and may not be consistent with market trends or future events. This research is based on current public information that we consider reliable, but we do not represent it as accurate, updated or complete, and it should not be relied on as such.
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