Economic Influences

July 2018

Unemployment indicators continue to show strong growth, but labor supply continues to pose significant problems.

Employment growth is up across all major segments, but underlying issues are not shown in these government reports. Homebuilding and industrial sectors continue to struggle to find the right employees. Builders are struggling to find skilled trades and bidding wars are occurring in hot markets driving prices higher. All these issues are contributing to higher costs that are being passed along. Add in the increasing prices of commodities and durables manufacturers are getting squeezed.

Our outlook is for durable sectors to slow their rates of growth and supply factors and pricing headwinds gain strength and hold back potential.

If you want to learn more about what we are seeing and our forecasts, then click here to talk to us today.

Total Civilian Unemployment Rate

Implication

Rate of decline in the unemployment percentage has slowed in recent months as pressures mount. Commodity price increases, labor supply issues, tariff-related price impacts and supply problems are driving increased headwinds. Durable manufacturing and supply-stream all are being impacted.

Implication

Unemployment holding at an average of 5% over the past several months is strong indicator of the supply of labor problem facing the building industry. Unemployment rate should be much lower than this given the strong demand, but the underlying problem is the type of labor that is available. Builders across the country are not finding the labor they need at the time they need it. Wages are going up, delays in orders are increasing, timeframes for completions are stretching longer and all those product suppliers and sub-contractors are feeling the cascading effect.

Implication

The lack of labor across the different durables sectors is forcing employers to start to look for inexperienced or lesser skilled employees. As a result, high school grads unemployment rate continues to decline as more opportunities present themselves.

College Unemployment Rate

Implication

Market for college graduates continues to remain strong. At 2%, unemployment is virtually non-existent for this segment. Trend in this rate will continue to be low as more jobs pull college educated people into categories where college education hasn’t traditionally been needed.   Building sector is a prime example of opportunities where what used to be considered blue-collar workers are resembling white-collar workers.

Implication

Despite all the draw from jobs, only 63% of the civilian labor force are participating. Changing U.S. demographics driving this as 55+ segment becomes a larger percentage overall. Younger age cohorts are experiencing increasing participation rates as more opportunities present themselves and wages also increasing. However, the overall rate will continue to be dominated by the older age segment and will keep participation rates hover in the low 60%’s.

Implication

Does the FED think they can manage the U.S. economy? Our view of their financial market engineering is that their actions are not yielding expected results and their go-to tools are ineffective. As such, they may think they can manage, but the indicators and the players in the economy know otherwise.

Implication

Despite rising prices and other issues related to housing, consumer and builder sentiment are at some of their highest points since 2000.  Builders continue to tell us this past year is the best they have ever had, even better than the mid-2000’s and in some areas, they are saying it’s at an unsustainable pace of growth.

2018-08-29T19:52:00+00:00