Joseki

Commentary

Quarterly Economic Update

 

We produce The Leopard View, a quarterly economic update with key assertions and commentary, for our clients and network. A few highlights from our May edition...


 

Current Economic Assertions and Changes (9 May 2018)

10-year US Treasury rate is 2.99%, up 14 basis points (bps) or 4.9%

WSJ prime rate is 4.75%, up 25 bps; up 75 bps or 18.75% since one year ago

Real US GDP growth (annualized) for Q1 (BEA first estimate April 27th) is 2.3%; 2017 GDP growth was 2.3%

CPI inflation 2.4% for 12 months ended March, up 0.3% year-over-year

The US Dollar vs major currencies index is 88.21 85.20, up 3.01% for Q1 and down 7.49% for the past year

US unemployment is 3.9%, down 0.2% from last quarter; the highest unemployment rate of the past decade was 10.0% in Oct 2009

Labor force participationis 62.8%, up 0.1%; historical peak was 67% Q1 2000

Brent crude oil price is $77.09 per barrel, up 22.77% from last quarter and up 54.52% from a year ago

US real household debt as a percentage of assets is 13.3%, down 0.1%; historical peak was just over 20% in 2008/2009 

US equities (broad market) are up 0.86% YTD and up 13.88% trailing 12 months

Corporate profits are down 5.99% year-over-year (Q4 2017, Federal Reserve Bank of St. Louis)

S&P Case-Schiller US National Home Price Index is 197.01, up 6.34% year-over-year (through February), 6.71% greater than previous peak of 184.62 in July 2006

S&P Case-Schiller Las Vegas Home Price Index is 173.41, up 11.65% year-over-year (through February); the previous peak was 234.71 in September 2006

Nonfarm business labor productivity increased 0.7% in Q1 2018; output increased 2.8% and hours worked increased 2.1%; from Q1 2017 to Q1 2018, productivity increased 1.3%, reflecting a 3.6% increase in output and a 2.2% increase in hours worked

 

Selected Commentary

Economy: we anticipate average GDP growth for 2018/19 of 4% with 2018 at 3.5%; increased labor force participation with approximately 11MM new jobs – expect growth in entry/lower level jobs and that the press will present this as people are losing because average earnings will fall – however, statistics from a group of currently employed people at any level will show growth in income; average US stock market value increase of 12% next 5-7 years

“If you look at the performance of the zero-income-tax states and the highest-income-tax-rate states, I believe a large amount of their difference is due to taxes. Not only is it true of the last decade, but I took these numbers back 50 years. And, there’s not one year in the last 50 where the zero-income-tax-rate states have not outperformed the highest-income-tax-rate states.” Art Laffer

Technology: developing and emerging technologies (practices) is a domain we must all interpret to adjust our offers, practices, narratives and strategies in order to be competitive. Each quarter I’ll offer a text that may be helpful. This articlearticulates Gartner’s claims on the top technology trends for 2018