Will Santa Deliver?
It would appear from the latest data that the U.S. economy is running full steam ahead. There is little in terms of actual data that would suggest a slowdown is coming anytime soon. Let’s review!
First, the latest jobs report suggests the economy is adding a sufficient amount of jobs to keep up with the number of new entrants into the workforce while maintaining an unemployment rate of 4.1 percent, which is a seventeen-year low. [i] [ii]
Second, the Q4 estimates now indicate that the U.S GDP will grow at levels well above 3 percent, and perhaps even closer to 4 percent. [iii]
If actual annual GDP growth clocks in at these estimated levels, it will mark the first time since 2005 that annual GDP has grown above 3 percent. [iv]
Third, wage growth is showing signs of life, albeit still muted. Wages grew at an annualized pace of 2.5 percent. Although this reflects a slight decrease from recent quarters, it is still much better than the benign growth we experienced through the end of 2016. [v]
What is even more promising is wage growth in the lowest paid jobs. Increased wages in low paying jobs outpaced growth in middle- and higher-paid jobs by 100 basis points. [vi]
Lastly, all of this positive macroeconomic data is clearly reflected in consumer sentiment, which has not reached these levels since 2004. [vii]
After reviewing all of this data, it would appear that we should expect a strong holiday shopping season; a little extra push from Santa will likely support strong earnings growth for Q4.
Tim Phillips, CEO, Phillips & Company
Robert Dinelli, Investment Analyst, Phillips & Company