Fact Pack! Inflation Continues to Slow
By Hightower Las Vegas and RCG Economics on July 14, 2023
The producer price index (PPI) — a measure of what suppliers and wholesalers are charging customers — rose just 0.1 percent month-over-month in June after dipping 0.4 percent in March, per the Bureau of Labor Statistics. Producer prices were up 0.1 percent year-over-year in June, down from 0.9 percent in May and the lowest year-over-year rate since August 2020.
Inflation dropped to 3 percent in June according to the Bureau of Labor Statistics, continuing a trend of moderating consumer prices largely driven by easing tensions in energy markets. As the following chart shows, when it comes to inflation the U.S. actually is faring relatively well in comparison with other G7 member nations:
As of May 2023
Since 2012, the Fed has been aiming at an inflation rate of 2 percent year-over-year. Though U.S. inflation dropped to 3 percent in June, consumer prices are still higher than the inflation target.
Fact Pack co-publisher and Hightower wealth management advisor Mike PeQueen:
A tight labor market (fewer jobs) and persistent wage growth will most likely lead the Fed to raise interest rates after skipping a hike in June.
Real average hourly earnings for all employees increased 0.2 percent from May to June, seasonally adjusted, per the U.S. Bureau of Labor Statistics. Real average weekly earnings increased 0.5 percent over the month driven by the change in real average hourly earnings combined with a 0.3-percent increase in the average workweek.
Real average hourly earnings increased 1.2 percent, seasonally adjusted, from June 2022 to June 2023.
Employment Rates
Three years after the response to COVID-19 abruptly left millions of Americans without jobs, adults of prime working age were employed nationwide at a slightly higher rate than before the pandemic in Q1 of 2023. Still, in 24 states, the average share of 25- to 54-year-olds with a job trailed pre-pandemic levels.
- The state furthest behind its pre-pandemic levels was West Virginia (-5.4 percentage points) — meaning that for every 100 people of prime working age, about five fewer were employed in the first quarter of 2023 than in the same quarter of 2020.
- New Mexico followed with a 4.1 percentage point drop.
- States with the greatest gains between the first quarters of 2020 and 2023 were Utah (3.8 percentage points), Mississippi (3.4 percentage points), and South Dakota (3.3 percentage points).
Map from Pew Research:
As of March 2023
Nevada saw a -1.5 percentage point change in prime-age employment-to-population ratio.
Outdoor Exposure
Data from the Bureau of Labor Statistics indicates that 32.9 percent of employees had regular outdoor exposure in 2022. Graph:
G20
When the G20 bank and finance chiefs gather in Gandhinagar next week, the world’s nations will be watching for word of collaborative action to address the problems of economic fragmentation, slowing growth, and high inflation.
In April, the International Monetary Fund projected global growth of 2.8 percent in 2023, down from 3.4 percent in 2022. The bulk of the expansion – more than 70 percent – is expected to come from the Asia-Pacific region.
Fact Pack co-publisher and wealth management advisor Mike PeQueen:
Recent high frequency indicators are a mixed bag. We are seeing weakness in the manufacturing sector but resilience in services across G20 countries and other advanced economies with strong labor markets. Restoring price stability and getting core inflation remains a priority now that global inflation seems to have peaked.
As of June 2023
The G20 last month announced securing $100 billion in special drawing rights (SDRs) pledges to be funneled from richer to poorer countries, a strong signal of broad international solidarity.
Economic Freedom
The Heritage Foundation is out with its annual assessment of economic freedom around the globe. 2023 map:
As of June 2022
(Map key notes: Green is good, orange is on the cusp of good, and red is no bueno.)
Rankings of top nations:
As of June 2022
A list of the not so good:
As of June 2022
The 1%
How much do you need to earn to be in the top 1 percent? A new study by SmartAsset analyzed 2020 data from the IRS and determined the 2023 income required to reach the highest-earning humans in each of the 50 states. For example, you need to earn $952,902 a year in Connecticut, but in West Virginia, you need “just” $374,712.
In Nevada, the magic number is $603,751, landing it in 17th place in the SmartAsset rankings:
“Top” 20:
- Connecticut $952,902
- Massachusetts $903,401
- California $844,266
- New Jersey $817,346
- Washington $804,853
- New York $776,662
- Colorado $709,092
- Florida $694,987
- Illinois $660,810
- New Hampshire $659,037
- Wyoming $656,118
- Virginia $643,848
- Maryland $633,333
- Texas $631,849
- Utah $630,544
- Minnesota $626,451
- Nevada $603,751
- South Dakota $590,373
- Pennsylvania $588,702
- North Dakota $585,556
Note: If Washington D.C. were a state, it would have come first in SmartAsset’s ranking, with an annual income of $1,013,698 required to be in the capital’s top 1%.
Housing
Realtor.com’s June 2023 Monthly Housing Market Trends Report showed that new listings were down about 26 percent year-over-year in June. From Realtor.com:
In June, the number of homes newly listed for sale declined by 25.7% compared to the same time last year. This was a faster rate of decline than May’s 22.7% decrease and new listings remained 27.6% below pre-pandemic 2017 to 2019 levels. During the first half of 2023, there were 20.1% fewer newly listed homes for sales on a typical day compared to the first half of 2022.
As of June 2023
The following graph from Altos Research shows the seasonal pattern for active single-family inventory since 2015. The red line is for 2023. The black line is for 2019:
Source: Calculated Risk as of June 2023
As you can see, inventory was down 4.6 percent compared to the same week in 2022, and down 51.0 percent compared to the same week in 2019.
For new homes, as of June, there were 4.1 months of homes under construction (blue line below), which was well above the normal level (because of supply chain constraints). There are 1.1 months of completed supply (red line), slightly below the normal level.
New home sales:
Source: Calculated Risk as of June 2023
New home inventory as a percent of total inventory is up at close to 23 percent. Why?
Fact Pack co-publisher and economist John Restrepo:
The lack of existing home inventory and relatively few distressed sales has been a plus for homebuilders. As always, the numbers tell the story: There are a near record 1.698 million new housing units under construction.
Source: Calculated Risk as of June 2023
Currently there are 695,000 single family units (the red line in the graph above) and 994,000 multi-family units under construction. (This ties the record set in July 1973 of multi-family units being built for the baby-boom generation.)
May saw a decline in both new and existing home sales due to higher mortgage rates, but it appears sales may have bottomed. The NAR reported that sales were at a “seasonally adjusted annual rate of 4.30 million in May.
Year-over-year, existing home sales dropped 20.4 percent in May:
Source: Calculated Risk as of May 2023
Below is a graph showing new home sales from the Census Bureau for four periods: 1978-1982, 1989 -1993, 2005-2020, and current. The prior peak in sales is set to 100:
Source: Calculated Risk as of July 2023
As for local markets in June…
As of June 2023
Marriage and Divorce Rates
In 2021, the U.S. marriage rate was 14.9 marriages per 1,000 women in the last year, down from 16.3 a decade earlier, according to the Census Bureau. The 2021 divorce rate dropped to 6.9 per 1,000 women in the last year, down from 9.7 in 2011.
Snapshot from the Census Bureau’s data visualization:
World Population Day
Tuesday was World Population Day, and according to the United Nations’ latest projections of global population, India surpassed China as the world’s most populous country in April 2023.
Having gradually closed the gap to China from more than 200 million people in 2000 to little more than 10 million in 2022, the UN Population Division predicts India’s population to reach 1,429 million by the end of July.
Here’s how the rankings of the 10 most populous countries have changed since 1950:
On the Horizon
Mike PeQueen:
Next week: Thursday’s initial jobless claims number is the one to watch. A strong labor market probably means more interest rate hikes.
