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US Economy: The past is prologue

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The economy should finish with its best year of growth since 3.15% in 2004. As of this writing in the third week of December gross domestic product (GDP) in the first three quarters averaged 3.3%. The Atlanta Fed GDPNow model estimates 2.7% annualized in the final three months which gives a year at 3.1%.  The fourth quarter need only finish at 2.2% to insure a 3% average in 2018.

Most major US economic statistics and indicators improved or remained at high levels this year. Unemployment declined from 4.1% in December 2017 to 3.7% in November a 49 year record. Non-Farm payrolls averaged 206,000 a month through November. That is the best job creation since 2015 and well above the 75,000-100,000 needed monthly to give jobs to new market entrants. 

Average hourly earnings moved from 2.5% in December 2017 to 3.1% in October and November, which though below pre-recession ranges is the highest since the financial crash. Personal income which includes investment and transfer earning to give a wider picture of household income improved at a steady 0.35% monthly pace through October.

One counter indicator to the health of the labor market has been the sharp rise in the number of weekly jobless claims in the past three months. The four week moving average has gone from 206,000 on September 15th  to 228,500 in the first week of December. It has since fallen to 222,000 in the week of Decmber 15th. One reason this statistic has not raised alarms is that claims are at levels not seen since the early 1970s. When claims began their rapid rise in late 2007 in the run into the financial crisis they began from a base at 320,000.

Consumption numbers were buoyant.  Retail sales saw the strongest annual growth in five years as did the monthly control group component of gross domestic product. Durable goods orders excluding the transportation sector, in practice the civilian airplane business of Boeing Company of Chicago, were heftier in the first six months of the year but still had the best averages since the middle of 2013. Likewise the 12 month moving average for real personal consumption expenditures moved to its best level in three years in August before dropping back as the fourth quarter began.


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