Curtis Dubay
Chief Economist, U.S Chamber of Commerce
Updated
August 25, 2023
Published
August 25, 2023
New home sales rose a strong 4.4% in July.Housing starts were also up a robust 3.9%.
Why it matters: These solid numbers are surprising because mortgage rates have been rising since early 2022.
– The average rate on a 30-year fixed-rate mortgage is over 7% now for the first time since November 2022.Rates had been around 6.3% in April, but have been rising since.
Be smart: Existing home sales are down because homeowners don’t want to give up their lower-rate mortgages.Buyers must turn to new homes instead, which accounts for the resiliency of their sales and housing starts.
– And: Builders are pricing aggressively, including with mortgage rate buydown incentives.This is supporting sales too.
Looking ahead: How long this situation persists is anyone’s guess.Housing demand continues to outstrip supply nationwide, which seems to put a floor under the housing market.
Retail Sales Surge in July
August 23, 2023
Retail sales rose 0.7% in July, coming off a strong 0.3% increase in June.
When adjusted for inflation, sales were even stronger.
Back-to-school shopping and Amazon’s Prime Day had an effect, especially on online sales.
Why it matters: COVID savings are largely spent and credit card balances have risen sharply.
But consumers continue spending because of the strong jobs market and income growth that is now outpacing inflation.
By the numbers:
– Sales rose at non-store retailers (mostly online sellers) (1.9%), food and drinking places (1.4%), sporting goods and hobby stores (1.5%), clothing and accessory stores (1%), food and beverage stores (0.8%), general merchandise stores (0.8%), building material and garden supply stores (0.7%), health and personal care stores (0.7%), and gas stations (0.4%).
– Sales declined at furniture stores (1.8%), electronics and appliance stores (1.3%), motor vehicles and parts dealers (0.3%), and miscellaneous stores (0.3%).
Bottom line: As long as the job market remains robust and incomes remain steady, consumers will have money to spend.
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Prices Rose 3.2% Annually in July
August 11, 2023
The Consumer Price Index (CPI), the broadest measure of consumer prices, rose 3.2% annually in July.That is up from June when it was 3%, but well down from the peak of 8.8% in June 2022.
– On a monthly basis, inflation rose 0.2% from June to July, the same rate as from May to June.
Why it matters: We are still far from getting inflation down to the Federal Reserve’s 2% target.
Big picture: Core prices, which strip out volatile elements like food and energy, rose 4.7% on an annual basis and 0.2% from June to July.This is the metric the Fed looks at most closely, and it is still very high and hasn’t come down much since the Fed started raising interest rates in March 2022.
– The stickiness of the core data likely means the Fed will have to keep future rate hikes on the table.
Other key data points:
– Energy prices fell 13% because of a 20% drop in gas prices.Electricity rose by 3%.
– Food at home (groceries) prices rose 0.3% in July and are up 3.6% annually.
– Housing rose 7.7% on an annual basis.
– Used cars were down 5.6% from a year ago, but new cars were up 3.5%.
Economic Policy Must Focus on Lack of Workers
August 9, 2023
Businesses created 187,000 jobs in July, continuing to drive our economic growth, even though the number came in just under the expectation of 200,000 jobs created.
The labor force grew another 152,000.
Why it matters: We are now more than 2.6 million workers above the pre-pandemic participation level.
– But, if we had the same participation rate now as in February 2020, there would be 1.9 million more workers in the labor force.
Big picture: The focus of policymakers must shift from a lack of jobs to a lack of workers.This was always on the horizon as our population aged, but COVID accelerated this.
The aim will be to bring more workers into the labor market.
What we’re doing: In 2021 the Chamber launched the
America Works Initiative and remains focused on helping employers develop and discover talent to fill open jobs.
By the numbers:
– Wages rose 0.4% from June and 4.4% annually compared to July 2022.
– Education and Health added 100,000 jobs in July.Wholesale and Retail Trade added 26,000 jobs.
Other services rose by 20,000.Construction increased by 19,000.
Financial Activities rose by 19,000.Leisure and Hospitality added 17,000.Government increased by 15,000, and Mining and Logging added 1,000.
Job Openings Gap Remains Wide
August 4, 2023
While economists talk about the labor market cooling, there were 9.6 million job openings in June, down only 34,000 from May.
Why it matters: There are now 3.6 million more job openings than unemployed workers.The worker shortage continues to be a major challenge for employers.
Be smart: The labor market remains tight.
Hiring in June remained at the same level as in May, and quits dropped slightly.
– Businesses are still adding workers, and workers are still confident they can quit their current jobs and find better ones easily.
Bottom line: A persistent labor shortage may be the new normal for employers.
Could the Economy Make a Soft Landing?
August 2, 2023
Many economic analysts are increasingly optimistic about the economy because some inflation data has improved and key economic data points like GDP growth, consumer spending, and job creation have been stronger than expected.
Why it matters: These analysts predict the economy will have a soft landing and avoid a recession in the wake of high inflation and higher interest rates used to combat it.
– Yes, but: The Federal Reserve has never raised rates as much and as fast as it has since March 2022 without a recession occurring.
Be smart: The chance of a soft landing has increased, but by no means is it assured.
– Inflation is still high, especially the data point the Fed watches–core PCE inflation.The Fed may have to raise rates again in September, which would slow the economy more than anticipated.
– Further, there are substantial lags when it comes to the impact of higher interest rates on the economy.
Big picture: We have been in a unique period since COVID began, so it is possible the Fed’s actions will not cause a recession.But to be banking on it is premature.
– We still see a potential slowdown later this year that could drag into 2024 and meet the definition of a recession.
Q2 Economic Growth Accelerates
July 28, 2023
The economy grew a robust 2.4% in the second quarter.That was faster than the 2% growth in the first quarter.
Why it matters: The ongoing strength of the economy in the face of high inflation, higher interest rates, and tightening financial conditions continues to astound.
Details:
– Growth was led by consumption, which rose by 1.6%.Spending on services, which rose 2.1%, drove that increase.
– Business investment was also strong, rising by 5.7%.Businesses invested heavily in both buildings and equipment.
Inventory build-up added modestly to growth too.
– Exports and imports both fell considerably – by 11% and 8% respectively.The fall in exports is likely due to a weaker global economy and a strong dollar.The drop in imports is more surprising.Imports of both goods and services fell.
Big picture: There will be revisions to this data, so this initial reading could change.For now, the economy did better than expected in the second quarter.
Read more from the Chamber:
Economic Data:Comprehensive quantitative snapshots of business sectors and topics to help business and political leaders make informed decisions.Workforce Data:Capturing the current state of the U.S.
workforce.Small Business Index:The MetLife & Small Business Index is released on a quarterly basis and is compiled from 750 unique online interviews with small business owners and operators each quarter.The Index delivers a comprehensive quantitative snapshot of the small business sector as well as explores small business owners’ perspectives on the latest economic and business trends.Middle Market Business Index:The survey panel consists of approximately 1,500 middle market executives and is designed to accurately reflect conditions in the middle market.
About the authors
Curtis Dubay
Curtis Dubay is Chief Economist, Economic Policy Division at the .
He heads the Chamber’s research on the U.S.and global economies..
