U.S. Registries – Linking buyers and sellers across North America

Month: March 2019

Strong surveys at odds with slowing growth

•The incoming monthly activity data suggest that GDP growth has slowed from 2.6% annualised in the fourth quarter to only around 1.5% in the first. At the same time, however, the business surveys have remained relatively upbeat, with a weighted average of the ISM activity surveys consistent with GDP growth accelerating above 4% annualised. (See Chart.) It’s clearly possible that growth picks up again in the second quarter. The rebound in consumer confidence suggests that consumption will continue to recover from the plunge in December, while a potential trade deal with China could give a temporary liftto exports. But with the fiscal boost having faded, and the continued slowdown in durables consumption and housing activity suggesting that higher interest rates are taking a heavier toll, a sustained recovery looks unlikely. We expect GDP growth to remain below its 2% potential pace this year, ruling out any further rate hikes from the Fed and ensuring that market expectations of rate cuts will continue to grow.
•Output and activity indicatorsshow that manufacturing output is set to fall in the first quarter. (Page 2.)
•Consumption indicatorsillustrate that spending growth has also slowed sharply.(Page 3.)
•Investment indicators suggest that business equipment investment growth is set to drop back. (Page 4.)
•External indicators reveal that the weakness of exports can’t solely be explained by China. (Page 5.)
•Labour market indicators remain consistent with a gradual acceleration in wage growth. (Page 6.)
•Inflation indicators point to a continued easing in underlying price pressures. (Pages 7 & 8.)
•Financial market indicators show that a 25bp Fed rate cut next year is now fully priced in. (Page 9.)
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Small Business Hiring Breaks Record

The great American jobs machine is still roaring. Slowing global growth and trade friction may cloud the economic horizon, but U.S. small businesses in February went on an historic hiring binge. That’s according to the latest employment report from the National Federation of Independent Business, due out later today.

NFIB has been conducting this monthly survey for decades. The organization’s chief economist William Dunkelberg reports that they’ve never seen results like these:

Job creation broke the 45-year record in February with a net addition of 0.52 workers per firm (including those making no change in employment), up from 0.25 in December and 0.33 in January. The previous record was 0.51 reached in May 1998.

 

NFIB also found a historic low in the percentage of business owners reducing employment—just 3% of survey respondents. “Owners are trying to hold on to the employees they have,” says Mr. Dunkelberg.

Readers can be forgiven for thinking that the economy is headed back down to the slow-growth new normal of the past decade. That’s certainly the consensus in the media industry. But across all industries, the owners of small firms don’t seem to share that view. After the February hiring spree, the survey finds plans for future job creation remain robust and the main obstacle is not lack of business opportunities, but a lack of workers to take advantage of them.

Mr. Dunkelberg shares more results from the survey of firm owners:

Fifty-seven percent reported hiring or trying to hire (up 1 point), but 49 percent (86 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill… Twenty-two percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem, only 3 points below the record high. Ten percent of owners find labor costs as their biggest problem, a record high for the 45-year survey.

 

It may be a problem for owners but of course rising wages represent welcome news for workers. A net 31% of firms reported raising compensation in February—below January’s 36% surge but still historically strong.

Small firms in the U.S. are reporting record job creation, higher wages and robust expansion plans.

All of this may have U.S. workers raising a toast to the new abnormal.

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