Looking Behind and Looking Ahead

Dwight Johnston, Vice President and Chief Economist for the California and Nevada Credit Union Leagues
Dwight Johnston, Vice President and Chief Economist for the California and Nevada Credit Union Leagues.

In this article we’ll recap the events and news over the past month that mattered most to the economy and markets, your credit union, and your members. Then we’ll look ahead at the key upcoming events you need to know.

Behind us—After surviving the early February turmoil in stocks, stocks were knocked back on Trump’s surprising tariff declaration of “harsh,” broad-based tariffs. But President Donald Trump delivered a watered-down version of tariffs, and stocks got back on track. Through all the ups and downs of stocks the past six weeks, bond yields have barely moved. More importantly, the economy continues its upward trajectory.

  • Nonfarm Payrolls recorded a stunning gain of 313,000 in February as economists were expecting 200,000 or less
  • Hourly wages rose by only .1% on the month and 2.6% on a year-over-year basis, reversing the year-over-year gain to 2.9% reported in January
  • California reported a sold payroll gain of 35,000 and a year-over-year wage growth number of 3.7% versus the national average of 2.6%
  • Consumer Confidence rose to a 17-year high
  • Auto sales were steady at 17.1 million units annualized
  • The key industrial measures were positive. The National ISM index rose to a 14-year high
  • New Fed Chairman Jerome Powell testified before Congress. He expressed great confidence in the economy and indicated he was in agreement that three rate increases are likely this year

Ahead for you—While the immediately threat of a trade war has cooled, the door is still open for skirmishes in the weeks ahead as our foreign trading partners sort out the fallout. Watch closely for developments in the North American Free Trade Agreement negotiations. The economic reports ahead should continue to be quite positive.   

  • March 13—Consumer Price Index. Inflation data has replaced jobs data as the most important data to the bond market. This could be very important to the bond market is it varies significantly from expectations
  • March 14—Retail Sales for February. After a disappointing January, we’re looking for a rebound in sales. This data release is usually important, but it will be less so given it will be based on activity prior to the stock market correction
  • March 21—Federal Open Market Committee rate decision. The Fed is expected to raise the funds rate to a range of 1.25% to 1.50%. Powell will hold a press conference after the announcement
  • April 6—Jobs report. Another huge upside surprise in Nonfarm Payrolls unlikely. Wage component will be the focus

Bottom line—The economy continues to perform well in 2018, and the pace could pick up if corporate spending accelerates due to corporate tax cuts. The economy’s only weakness could come from some exogenous shock.   

Article by Dwight Johnston, Vice President and Chief Economist for the California and Nevada Credit Union Leagues.

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