The pace of hiring has cooled, not an unexpected development as business and consumer confidence appears to be shaken given the uncertainty surrounding trade policy and the further path of economic growth. Payroll gains have slowed to an average of 158,000 jobs per month in 2019, down about a third from the same time last year. Supply constraints and rising costs, in conjunction with fading fiscal stimulus and trade uncertainty, will continue to weigh on hiring plans. On a positive note, unemployment insurance claims remain historically low, signaling that firms have not resorted to layoffs to deal with slowing economic growth. Other positive signals include an increase in the labor force participation rate, up 50 bps from a year earlier and a steady 3.7% unemployment rate for the third straight month.
*WTI Crude Oil Spot Price. Data points through end of September 2019. Change represents month-over-month change.
The U.S. economy grew at an annual rate of 2.0% between April and June (Q2 2019). The slower pace of growth was mostly driven by a sharp contraction in private business investment that is being blamed on the ongoing trade war with China. Net-exports also negatively contributed to GDP as the U.S. manufacturing sector recorded a poor quarter. Non-defense government spending positively contributed to the nation’s GDP, but less than the stellar contribution from consumer spending which recorded its highest level of annualized growth in 4-1/2 years. Although the ongoing trade war with China is concerning for some sectors, the U.S. economy is expected to continue expanding at a moderate pace.
A reflection of the heightened uncertainty in the current economic landscape, consumer confidence levels fluctuated in recent months, falling to 125.1 in September 2019 after nearing cyclical highs in prior months. Signs of slowing economic growth in international markets, rising trade tensions and the lingering Brexit fight are at odds with signals of continued growth domestically. Despite this recent drop, consumer confidence remains well above its long-term average, an indication of the still positive, but diminishing, optimism among U.S. consumers.
Supported by the tight labor market, improved wage growth, and recent stock market performance, retail sales remained healthy into the final half of 2019, increasing by 3.5% y-o-y in August 2019. Although the pace of retail sales has receded in comparison to 2018, its continued rise has counterbalanced weakness in other segments of the economy, namely manufacturing and business investment.
Low unemployment and near historic low mortgage rates have stimulated the sluggish U.S. housing market in recent months. The average rate for a 30-year fixed mortgage fell below 4% in May, leading to an uptick in the number of U.S. home sales. The growing number of home sales has encouraged the nation’s homebuilders to proceed with new projects as evidenced by the number of new housing starts reaching their highest level since mid-2007. Despite the uptick in new home starts, the months-of-supply for new homes has continued to decline. In the coming months, the U.S. housing sector is set to benefit from lower interest rates and increased sales activity.
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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