What I Saw Last Week

Income & Spending rose by 0.3% and 0.4% respectively in March – I had forecast both to have risen by 0.4%.


The takeaway from the report is that it shows consumer inflation in the reaches of the Federal Reserve’s inflation target, which will give the Federal Reserve some data-based ammunition to keep raising the fed funds rate.

As I had expected, the NAR Pending Home Sales Index for March disappointed; however, the increase of just 0.4% was even worse than my forecast for a 2.0% increase. Additionally, home sales were down 3% when compared to March 2017, marking the third straight month of annual declines.


Regionally, pending home sales in the Northeast fell 5.6% and were 8.1% below a year ago. In the Midwest, sales rose 2.4% monthly and fell 6.0% annually. Sale in the South rose 2.5% monthly and were 0.3% higher than last March. Sales in the West declined 1.1% monthly and were 2.2% below a year ago.

The takeaway here is that the biggest challenge in today’s housing market continues to be a severe shortage of homes for sale, especially at the lower end of the market, where demand is highest. There were about 9% fewer homes on the market in March when compared to a year ago, which functioned to push prices up 8%.

U.S. Construction Spending declined 1.7% in March – I had forecast a more modest 0.5% drop, following an upwardly revised 1.0% increase (from 0.1%) for February.


The March report featured a 2.1% decline in total private construction spending. Total public construction spending was flat.

Public construction spending was held down by a 2.7% decline in transportation spending and a 0.1% decline in educational spending. A 1.2% increase in highway and street spending acted as an offset.

On a year-over-year basis, total construction spending was up 3.6%, with public construction spending up 3.0% and private construction spending up 3.9%.

The takeaway from the report is that construction spending growth continues to run at a relatively slow pace, which is an inhibitor of stronger overall growth.

US Non-Farm Payrolls rose by 164,000 in April – I had forecast 200,000 following a revised 135,000 (from 103,000) in March.


Over the past three months, job gains have averaged 208,000 per month.

April private sector payrolls increased by 168,000 and March private sector payrolls were revised up to 135,000 from 102,000.  February private sector payrolls were also revised up to 321,000 from 320,000.

The Unemployment Rate in April dropped to 3.9% from 4.1%. I had forecast a drop to 4.0%.


3.9% is the lowest level seen since December of 2000 and the labor force participation rate dipped in April despite reports pointing to improved job-finding prospects. It was the drop in the participation rate, too, that drove the drop in the unemployment rate lower than I had forecast.

Average hourly earnings were up 0.15%, so call it 0.2% with rounding, which was expected. The surprise there perhaps is that it computed into a year-over-year trend that remains remarkably understated given an unemployment rate with a 3-handle on it, initial jobless claims that are at multi-decade lows, and the acknowledgment from manufacturers that they are finding it difficult to find skilled labor.

In aggregate, it was a pleasing report but, with no real surprises, it is unlikely that the Fed will change its current stance of two more rate rises this year.

What to Watch for This Week

Consumer Credit rose by $10.6B in February and the March number should show a further increase of $16.1B.

Inflation, as measured by the Consumer Price Index, dropped 0.1% in March with the core rate up by 0.3%. I expect to see the April data show total inflation rising by 0.1% and the core rate up by 0.2%.

Consumer Sentiment in Early May is likely to have ticked down from the final April number of 98.8. Look for it to come in at 98.0.