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]

Change in Nonfarm Payrolls.JPG

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]

Average hourly earnings.JPG

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]

YOY Wage Growth.JPG

Lastly, all of this positive macroeconomic data is clearly reflected in consumer sentiment, which has not reached these levels since 2004.  [vii]

Consumer Sentiment.JPG

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.

If you have questions or comments, please let us know.  You can contact us via Twitter and Facebook, or you can e-mail Tim directly.  For additional information, please visit our website.

Tim Phillips, CEO, Phillips & Company 
Robert Dinelli, Investment Analyst, Phillips & Company 


i.         https://fred.stlouisfed.org/series/UNRATE
ii.        https://www.economy.com/dismal/indicators/releases/usa_employ/3BBDC551-56E3-44EB-9FC4-E546E1A78D15/United-States-Employment-Situation
iii.       https://www.newyorkfed.org/research/policy/nowcast
iv.       https://fred.stlouisfed.org/series/GDPC1#0
v.        https://fred.stlouisfed.org/series/CES0500000003
vi.       https://www.axios.com/the-shrinking-of-inequality-2515429929.html
vii.      https://fred.stlouisfed.org/series/UMCSENT