• A Jack Johnson Playlist

    Sitting, Waiting, Wishing Despite the record-breaking length of this economic expansion, inflation has made fewer appearances in the last decade than Eagles Super Bowl wins ever. Consumer inflation in 2019 increased by 2.3%, which is the highest rate since 2011. Additionally, this muted inflation is really only present in certain pockets of the economy like healthcare where prices increased 4.6% last year. For producers, costs increased an even more meager 1.3% last year.  Moral of the story: Wages increased a mere 0.7% in 2019 while we were seeing record-low levels of unemployment. Even tariffs didn’t have a meaningful impact on consumer or producer prices. If we haven’t seen it yet,…

  • Wrapping up 2019

    There’s a job for that  The economy created 145k new jobs to cap off the last month of the decade. While this number fell 20k short of expectations and was accompanied by downward revisions for the prior two months’ reported numbers, unemployment remained at a 50-year low. A broader unemployment rate (U6), which includes discouraged workers no longer seeking jobs and part-time workers looking for full-time jobs, fell to all-time record low levels in December. Despite these unemployment levels, wage growth fell below 3% in December for the first time since the summer of 2018.  Moral of the story: We created 2.1m jobs in 2019, which is down from the…

  • Trying to See 2020

    New year, new optimism The manufacturing sector posted the fifth straight month of contraction in December as the ISM manufacturing index came in at 47.2 (below 50 indicates a contractionary environment). This marks the lowest reading for this index since June 2009, when we were just coming out of the global financial crisis. A big driver for this weakness was Boeing’s suspension of the 737 Max production and the recent GM strike.  Moral of the story: The manufacturing sector has been plagued by slowing global growth and the trade war with China. However, as we make progress toward a deal with China, the manufacturing sector should see some reprieve in…

  • What. A. Year.

    First of all, thank you to all you readers for an incredible first year of this venture. It has been an absolute pleasure to be part of your Sunday morning reading for the last 12 months. As always, I love hearing your feedback – I’m constantly on the lookout for interesting reads and ideas – email me anytime at uma@unbenchd.com. I will be back in your inbox on January 5th following a short break from the regularly scheduled programming next week. Until then, happy holidays and happy new year to you all, and enjoy this last weekly digest of the decade.  There’s still some hope  Despite last week’s disappointing retail sales report, consumer…

  • Looking for Christmas Gifts

    Falling flat  Core consumer price inflation remained unchanged at 2.3% on an annual basis in November (this used to be close to 3% last summer) and wages remained flat as well. Producer prices were equally unexciting in November with the annual rate of inflation remaining unaffected at 1.1% (this was at a seven-year high of 3.4% last summer). Moral of the story: Inflation remains completely tame and if even producers aren’t seeing the inflation despite the tariffs, it’s difficult to see how inflation builds up for the consumer. Inflation would have to meaningfully deteriorate or accelerate for the Fed to become concerned – they left policy unchanged, as expected, at…

  • Economic Indicators Playing Games

    Duck  The US manufacturing sector continues to contract as the ISM manufacturing index came in at 48.1 in November, down 20bps from last month. A reading below 50 is indicative of a contractionary environment, and this marks the fourth straight month of contraction. More concerning is the composition of the index as new orders fell to the lowest level since April 2009. The services side of the economy isn’t doing much better as the ISM non-manufacturing index fell again in November to 53.9, which is only slightly in positive territory.  Moral of the story: Honestly, the manufacturing sector is effectively already in a recession right now. The services sector isn’t…

  • Democracy FTW

    Coming back from the depths  Since the Global Financial Crisis in 2007-2008, the housing market has been clawing itself out of a deep, deep hole given housing was the crux of the issue. But thanks to lower interest rates and an aging generation of “millennials” who need space for their growing families, October marked the third month in a row when the annual pace of single-family home sales was higher than 700k – the last time this happened was 2007.  Moral of the story: We’ve been seeing an increase in homeownership rates recently due to lower interest rates and an increase in home purchases would definitely help boost GDP as we head into 2020,…

  • Consuming thoughts on the consumer

    The Fed’s thoughts  Meeting minutes from the latest FOMC meeting indicated a more positive outlook of the economy in October than the prior meeting. However, officials voted with an overwhelming majority (8 to 2) to cut rates for the third straight meeting as the committee felt uncertainties associated with trade tensions and geopolitical risks had eased but still remained elevated. Officials also discussed tools to use in the next recession and unanimously opposed pushing rates into negative territory (ICYMI, there are countries in Europe where you literally get paid to take out a mortgage to buy a house because interest rates are **that** negative).  Moral of the story: There was widespread support to move to…

  • The Beginning of the End?

    Deck the Wal’s…  Retail sales rebounded in October after a rut in numbers recently but the headline strength was driven by auto and gasoline sales. Excluding those, retail sales only rose 0.1% this month as most retailers experienced (hopefully) just a calm before the holiday season shopping storm. Online retailers, however, continued to see positive results. Moral of the story: Consumer surveys are pointing to the possibility of a strong holiday shopping season but the decrease in spending reported in September combined with the lackluster increase in October makes me feel meh. However, Walmart’s earnings release this week was quite strong and management increased full-year outlook ahead of the holiday…

  • The Blame Game

    Why is the services sector slowing? The manufacturing sector in this country has seen better days and continues to contract, but the services side of the economy, which is a much larger part of our economy today, rebounded in October after hitting a three-year low in September. The index saw improvements for new orders as well as employment, which increased 3.3 points from a five-year low in September.  Moral of the story: Services sectors have been more insulated from the negative impacts of the trade war with China compared to manufacturing sectors but have still been impacted by the slowdown. The ISM non-manufacturing index six points lower than its cycle…