Consumers seem to be doing fine, in spite of their worries about jobs in the latest University of Michigan sentiment survey, the economy and budget deficits (their own more than governments’). June average hourly earnings improved to a 0.3 percent boost from 0.2 percent in May, in the latest unemployment report. And two leading indicators for hiring were up. First, the average workweek edged up to 34.5 hours from 34.4 in May. Second, temp worker hirings were up 25,000 after a 19,000 boost in May. This should presage more job creation in the fall.
Graph: Calculated Risk
Even though job creation was sluggish in June so that the unemployment rate didn’t change at 8.2 percent, there are some positive signs for manufacturing and personal income. Strength was in the goods-producing sector. Employment in this sector rebounded 13,000 after a 21,000 decline in May. Manufacturing increased 11,000 after a 9,000 rise in May. Construction posted a modest 2,000 gain after dropping 35,000 the month before.
Either consumers are little more optimistic about the economy than they admit in confidence surveys or cars are getting too old and need replacing or some of both. Regardless, demand picked back up in this portion of the consumer sector in June.
Unit new motor vehicle sales rebounded 2.2 percent to a 14.1 million annual rate from May's rate of 13.8 million. Strength was in domestic cars which jumped 5.5 percent and in domestic light trucks, up 3.6 percent, for combined domestic units of 11.1 million annualized versus 10.6 million in May.
So personal expenditures are still increasing, up almost 2 percent, which is why Gross Domestic Growth is also up 1.9 percent this year to date. It means consumers are still cautious, as not enough jobs are yet being created.
Lastly, the surest sign of consumer health is the Federal Reserve’s monthly Consumer Credit report, which totals all consumer borrowing. Borrowing is up a whopping 8 percent in May, most of it revolving, credit card debt. This is the highest total since 2007, before the Great Recession, and double recent borrowing, which means consumers are feeling confident enough to actually increase their spending. Consumer borrowing had averaged 4 to 5 percent increases since 2007.
We will have more to report on industrial production, retail and housing sales next week. They may show that although the economy has slowed during the summer months, growth should pick up in the fall.
Harlan Green © 2012