• Retail Sales Up 0.4% in April and Up 1.6% Over April 2022

    Plus Interesting Highlights from 2021 Retail Sales

    The U.S. Census Bureau conducts the Advance Monthly Retail Trade and Food Services Survey to provide an early estimate of monthly sales by kind of business for retail and food service firms located in the United States.

    Each month, questionnaires are mailed to a probability sample of approximately 4,800 employer firms selected from the larger Monthly Retail Trade Survey.


    Retail Sales Up in April 2023

    On Tuesday, the U.S. Census Bureau announced the following advance estimates of U.S. retail and food services sales for April 2023 adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $686.1 billion, up 0.4% from the previous month, and up 1.6% above April 2022.

    Further:

    • Total sales for the February 2023 through April 2023 period were up 3.1% from the same period a year ago.
       
    • The February 2023 to March 2023 percent change was revised from down 0.6% to down 0.7%.
       
    • Retail trade sales were up 0.4% from March 2023, and up 0.5% above last year.
       
    • Nonstore retailers were up 8.0% from last year
       
    • Food services and drinking places were up 9.4% from April 2022.

    Highlights From Total U.S. Retail Sales in 2021

    • Retail sales for the nation increased 17.1%, from $5,572.0 billion in 2020 to $6,522.6 billion in 2021.
       
    • Men’s clothing stores had $8.3 billion in sales in 2021, up 59.1% from 2020.
       
    • Motor Vehicle and Parts Dealers’ sales increased 22.8%, from $1,208.2 billion in 2020 to $1,484.1 billion in 2021.
       
    • Grocery Store sales increased 4.3%, from $759.4 billion in 2020 to $792.3 billion in 2021.
       
    • Gasoline Station sales increased 32.6%, from $426.9 billion in 2020 to $566.1 billion in 2021.
       
    • Electronic shopping and mail-order houses sales increased 15.4%, from $891.1 billion in 2020 to $1,028.0 billion in 2021.

    Sources: census.gov

  • Weekly Market Outlook

    From the U.S.debt ceiling deliberations to rate cuts in China, the pace of U.S. retail sales and the job picture in Europe. I’m Jeff Kleintop with 90 seconds of what you need to know for the week ahead.

    Stocks in the U.S. were weighed down by the looming debt ceiling last week. While the White House meeting didn’t yieldany big breakthrough., staffs continued meeting to discuss a deal. The president and four top congressional leaderswill meet again early this week as the June 1st deadline looms.

    A deal may be taking shape in the form of clawing back billions of unspent COVID money, reforming the energy project permitting process, and agreeing to negotiate a set of spending cuts in the upcoming budget package. All seems like it could work, but getting a deal passed by both chambers in time is still a risk.

    China’s April economic data, due Wednesday will likely see a production and retail sales jump in comparison to last year’s terrible numbers during the lockdowns. But the month on month figures may show slowing reopening momentum and open the door to a rate cut by China’s central bank. Auto sales will likely boost April U.S. retail sales due Tuesday.

    Auto sales jumped to 15.9 million annualized units in April from 14.8 in March. But other categories may signal softness.

    Also on Thursday, the U.K. will release its latest batch of labor market data. The Bank of England raised its target rate by 25 basis points last week. Another strong reading for wages may keep policymakers on a path of higher rates, with the next meeting on June 22nd.

  • Paying Off Your Mortgage vs. Investing More

    What’s the Best Strategy for Your Financial Future?

    Learn the Benefits and Drawbacks of Both Options

    Are you wondering about the benefits and drawbacks of paying off your mortgage vs. investing? Paying off your mortgage early and investing more are both strategies that can help you achieve long-term financial stability, but it can be difficult to determine which goal to prioritize. In this article, we’ll explore the pros and cons of both strategies to help you determine which may be the best for your financial future.

    Benefits of Paying Off Your Mortgage Early

    First, let’s consider the benefits of paying off your mortgage early. It sounds ideal, right? You can save money in the long run and own your home outright more quickly than the terms of your loan determined. By making additional payments or accelerating your payment schedule, you can reduce the amount of interest you pay over the life of your loan, potentially saving tens of thousands of dollars. Additionally, paying off your mortgage early can provide a sense of financial security and peace of mind, as you will own your home outright and have no mortgage payment regardless of what the future may hold.

    Drawbacks of Paying Off Your Mortgage Early

    Of course, the question of paying off your mortgage vs. investing would be an easy decision if there were only clear benefits to one decision or the other. However, there are also some drawbacks to paying off your mortgage early. If you put all your extra money toward your mortgage, you may miss out on other opportunities to invest that money and earn higher returns. Additionally, if you focus too heavily on paying off your mortgage, you may not be able to take advantage of other financial opportunities, such as saving for retirement or building an emergency fund. So, before you opt for paying off your mortgage vs. investing more – or focusing on another important financial goal – consider the opportunity cost of putting all your financial eggs in one basket, so to speak.

    Related Article: How Inflation Impacts Wealth Management and Investment Strategies

    Benefits of Investing More

    While there are clear benefits to paying off your mortgage vs. investing, don’t lose sight of the fact that investing more can be a powerful tool for building long-term wealth. By investing in stocks, mutual funds, or other assets, you have the potential to earn higher returns over time – potentially even outpacing the interest rate on your mortgage. Additionally, investing can provide diversification and help you build a well-rounded portfolio that can weather market fluctuations and economic downturns.

    Drawbacks of Investing More

    Investing, even in low-risk assets, does come with some risks. There is always a chance that you may lose money, particularly if you invest in riskier assets. Additionally, investing requires discipline and a long-term perspective. You must be prepared to weather market ups and downs, and not panic or make rash decisions when the market takes a downturn. If you already struggle with keeping your emotions in check with regard to your investments, it may not be best for you to significantly increase the dollar figure you’re investing.

    Paying Off Your Mortgage vs. Investing More: What’s Right for You?

    As with many financial decisions, what is best for your financial future truly comes down to your unique circumstances, goals, and priorities. If you value the security of owning your home outright and want to reduce your debt, paying off your mortgage early may be the best choice for you. On the other hand, if you’re willing to take on some risk and prioritize long-term wealth building, investing more may be the better choice.

    At the end of the day, paying off your mortgage or investing more are both valid strategies for achieving long-term financial stability. By weighing the pros and cons of each approach and considering your individual circumstances and priorities, you can make an informed decision about which strategy is right for you.

    If you’d like to discuss paying off your mortgage vs. investing more, contact Lane Hipple Wealth Management Group at our Moorestown, NJ office by calling 856-452-8026, emailing info@lanehipple.com, or to schedule a complimentary discovery call, use this link to find a convenient time.

    Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.

  • Market Snapshot – May 2023

    Published by Charles Schwab

    Given the attention lately on the health of the labor market, that’s the topic for this month’s video, especially in the wake ofwhat was at least on the surface, a better than expected jobs report for April.

    Now, let’s start with an important discussion around buckets. Buckets? ‘What is she talking about?’, you probably ask. Well, pretty much every economic data point can be sorted into one of three broad buckets: leading indicators, coincident indicators, and lagging indicators. In addition, there are subsets of leading indicators. In other words, certain data points that lead the common leading indicators. And we’ll get to that in more detail shortly.

    Leading Indicators

    Initial unemployment claims represents one of those heads up indicators that moves in advance of broader economic trends. This table shows every official recession start point by month back to the late 1960s.In addition, the dates and levels of troughs in the four week average of unemployment claims, as well as the percentage increase in claims leading into each recession start point. This is actually a perfect example of my – probably my favorite adage, which is better or worse, tends to matter more than good or bad when it comes to economic data. Yes, the latest reading of 239,000 for the four week average of unemployment claims is still low in level terms; no question about that. But it’s up more than 25%from the trough, which was last September. And as you can see, the average increase in claims heading into recessions has historically only been 20%. Again, it’s the rate of change that matters at least as much as the level.

    Coincident Indicators

    Nonfarm payrolls is one such indicator. Now, as you can see, payrolls are actually often still trending higher at the onset of recessions, in part because the NBER, they’re the official arbiters of recessions, they backdate recessions’ starts to at or near whatever the recent peak was in the aggregate data they track, including payrolls. So keep that in mind.

    Lagging Indicators

    Here’s a long term look at the unemployment rate. I can’t tell you, especially these days, how often I hear something to the tune of there’s no way the economy is at risk of a recession with such a low unemployment rate. Well, as a lagging indicator. The unemployment rate doesn’t foretell recessions. In fact, as you can see, it’s historically been very near its low at the outset of recessions. Maybe put another way, a rising unemployment rate doesn’t bring on recessions. Recessions ultimately bring on a rising unemployment rate. Now, an understanding of the relationship between payrolls and the unemployment rate is also important. The monthly nonfarm payrolls release comes from the Bureau of Labor Statistics establishment survey. That’s what it’s called, which counts jobs. On the other hand, the unemployment rate is calculated from a separate survey called the Household Survey, which counts people. Now, over the past 12 months, the establishment survey suggests that 4.25 million jobs were added, while it’s only 2.7 million jobs per the household survey. Now, some of the differences. The establishment survey includes qualitative assumptions and adjustments tied to seasonality for one, as well as what the Bureau of Labor Statistics calls the birth death model. It’s not of people. It estimates the birth and death of businesses. For what it’s worth, the birth/death assumptions in particular tend to overstate business births and understate business deaths at important inflection points down in the economy. In addition, again, for what it’s worth, the household survey does tend to be more accurate around those same inflection down points with the establishment survey data ultimately subject to pretty significant revisions to prior releases. In fact, related to that, the April jobs report showed payroll growth that was stronger than expected. However, there were significant revisions to the prior two months data. In fact, the downward revision to March’s data was about the same amount by which the April data beat expectations. Keep that in mind.

    Now, in another sign of at least a loosening up of what has been a very tight labor market, the prime age labor force participation rate continues to move higher and actually finally surpassed the pre-pandemic peak. Now, this at least, is in keeping with what the Federal Reserve is looking for to help bring inflation down.

    Now, another component of the labor market tied to the ongoing inflation problem is wage growth not yet approaching what might be considered the Fed’s comfort zone. As of April, average hourly earnings were slightly higher than the prior month. Keep in mind, though, that this is an average and is likely skewed lower by something called the mix shift. I’ll explain that in a moment. Because of this, we also need to look at median measures of wage growth, not just average measures. And we can look at a median courtesy of the Atlanta Fed Wage Growth tracker as it’s called. Now you see a meaningful divergence between these two measures recently, and that’s because layoffs to date have been disproportionately biased toward higher wage jobs within higher wage industries. So get back to the average thing and the mix shift. What happens when you take a bunch of high numbers out of an average? The average goes down. A median measure is not biased as such. Hence the spread between the two. And we can look at this in a little more detail here. This plots average hourly earnings against payroll growth for each defined sector. And the mixed shift effect is in play. If you look at the information and education slash health services sectors as two examples. Information, as you can see, is the highest paying sector, but job creation was the weakest in April. Conversely, the education/health services sector is in the middle of the pack in terms of hourly earnings, but had the strongest job growth last month.

    Finally, we can move on to the recent release of data from the JOLTS report, that stands for the Job Opening and Labor Turnover Survey. Job openings fell from nearly 10 million in February to less than 9.6 million in March. By the way, the data lags other labor market data by a month. That’s why we’re talking about March data and not April. Put another way, the job openings rate fell to 5.8%,keeping its swift move off the peak in places you can see. Now, the rolling over in job openings has been a key supporting factor for those hoping for a soft landing. But that wasn’t the case in March. Given that the layoffs and discharge rate rose sharply. If we continue to see this, it would confirm that the reduction in job openings is consistent with a recession or hard landing, not a soft landing.

    In summary, unemployment claims lead with job openings and layoffs leading those. Payrolls are a coincident indicator, also subject to revisions and adjustment vagaries. And the unemployment rate lags. In keeping with what the Fed wants to see, the labor force participation rate is moving higher, but wage growth may still be a little too hot. Unique in this cycle is the “top down”, as I’ve been calling it, or higher wage nature of layoffs to date. But of course, so many things are unique in this pandemic-afflicted cycle. My final thought is to remind viewers that it’s often the case that better or worse matters more than good. Keep that in mind as you look at economic data to judge just where we are in this unique cycle.

  • National Vacancy Rates Higher Versus This Time Last Quarter and Last Year

    The U.S. Census Bureau announced the following residential vacancies and homeownership statistics for the first quarter 2023:

    • National vacancy rates in the first quarter 2023 were 6.4% for rental housing and 0.8% for homeowner housing.
       
    • The rental vacancy rate was higher than the rate in the first quarter 2022 (5.8%) and higher than the rate in the fourth quarter 2022 (5.8%).
       
    • The homeowner vacancy rate of 0.8% was virtually the same as the rate in the first quarter 2022 (0.8%) and virtually the same as the rate in the fourth quarter 2022 (0.8%).
       
    • The homeownership rate of 66.0% was not statistically different from the rate in the first quarter 2022 (65.4%) and not statistically different from the rate in the fourth quarter 2022 (65.9%).
       
    • In the first quarter 2023, the median asking rent for vacant for rent units was $1,462.
       
    • In the first quarter 2023, the median asking sales price for vacant for sale units was $319,000.
    • Approximately 89.6% of the housing units in the United States in the first quarter 2023 were occupied and 10.4% were vacant.
       
    • Owner-occupied housing units made up 59.1% of total housing units, while renter-occupied units made up 30.5% of the inventory in the first quarter 2023.
       
    • Vacant year-round units comprised 7.9% of total housing units, while 2.5% were vacant for seasonal use.
       
    • Approximately 2.1% of the total units were vacant for rent, 0.5% were vacant for sale only and 0.6% were rented or sold but not yet occupied.
       
    • Vacant units that were held off market comprised 4.8% of the total housing stock – 1.5% were for occasional use, 0.8% were temporarily occupied by persons with usual residence elsewhere (URE) and 2.5% were vacant for a variety of other reasons.

    Sources: census.gov