US: Vigorous economy

5 min
Dan North
Dan North Senior Economist for North America

A host of recent reports depict a vigorous and accelerating economy. The May employment report exceeded expectations, creating a robust 223k jobs, driving the unemployment rate to 3.8%, tying for the lowest in 48 years. The number of job openings set yet another record and exceeded the number of job seekers by yet another record margin. Real disposable personal income rose in April from +1.7% y/y to +1.9% and real personal consumption expenditure (PCE) rose from +2.4% to +2.7%, boding well for Q2 GDP. Both the manufacturing and services ISM indexes rose in May, with 19 of 20 components collectively above 50 points. Backlogs hit 14- and 21-year records, respectively, and pricing pressures are evident in both reports with manufacturing running a very strong 79.5. Core factory orders rose +1% m/m to +5.7% y/y, while shipments, which feed into GDP, gained +0.9% m/m, again boding well for Q2. The Fed will likely raise interest rates next week.