Inflation, Income, & More

Week in Review: May 22-26

There’s no better way to kick off the holiday weekend than catching up on a week that gave us new data on inflation, home sales, durable goods orders, income, spending, saving, and more.

Monday

State Employment and Unemployment Rates

The unemployment rate fell in 14 states and held steady in 36 states in April. South Dakota has the lowest unemployment rate at 1.9%, Nevada the highest at a still pretty low 5.4%. Ten states set new all-time low unemployment rates (the records date back to 1976).

Payroll employment increased in 5 states, fell in 1 state (Rhode Island), and was pretty much flat in the rest. On a year-over-year basis, employment is up in 40 states and flat in the other 10. If you want to see how your state performed, you can dig into the release.

Labor Force Characteristic of Foreign-Born Workers

Foreign-born workers accounted for 18.1% of the U.S. civilian labor force in 2022, the highest level on record. About half of foreign-born workers are of Hispanic ethnicity, while a quarter are Asian. Foreign-born men participate in the labor force at a much higher rate than native-born men (77% vs. 66%), while the opposite is true for women (55% for foreign-born and 57% for native-born).

Looking at these data on a monthly basis through April 2023, the foreign-born labor force has increased nearly 8% since the start of the pandemic, while the native-born labor force is still just short of reaching full recovery.

What Caused the U.S. Pandemic-Era Inflation?

Ben Bernanke and Olivier Blanchard, two very famous economists, published a paper on the causes of inflation over the past few years. Their big findings include that 1) before Russia invaded Ukraine, inflation was caused by demand exceeding supply due to pandemic-relief packages and a shift in spending from services to goods, and 2) wage pressures haven’t been a huge driver of inflation so far, but now unemployment will probably have to rise for inflation to get back to the 2% target.

Blanchard has a good Twitter thread recapping their findings. Unless you’re really interested in the nuts and bolts of this kind of stuff, read the Twitter thread instead of the actual paper.

Gas Prices

Gas prices held steady at about $3.65/gallon for the third straight week but, at $3.645/gallon, are about $1.05 lower than during the same week one year ago. It’s so cheap

TSA Checkpoint Travel Numbers

Weekly travel numbers have edged above 2019 levels for the first time since late April (note that we compare 2023 numbers to 2019 because it serves as pre-pandemic baseline). Over the past month, there have been 1.3% fewer travelers than in 2019.

Tuesday

New Home Sales

More new homes were sold in April than in any month since March 2022. This bounce in sales is good to see, but inventory levels barely increased and are essentially flat year over year.

The biggest takeaway here is that sales of new houses priced under $400,000 surged 21% in April, while sales of homes priced over $400,000 fell 18%. As a result, the median sales price fell to $420,800, the lowest level since December 2021.

Of the 62,000 new homes sold in April, construction had yet to start on 15,000. About 25,000 of those sold homes were currently under construction, while 22,000 had been completed.

S&P Global Flash US Composite PMI

This is a preliminary reading of S&P’s May Purchasing Manager Indices, which are indicators of business activity based on a survey of U.S. companies. Both overall output and activity in the services sector expanded at the fastest rate in 13 months. Manufacturing output expanded but at a slower rate than in April, while overall business in the manufacturing segment contracted for the month.

Overall, this is a pretty upbeat reading. We’ll cover this in more detail when the actual (not preliminary) readings are released in a few weeks.

Wednesday

FOMC Minutes