Retail Sales, Jobless Claims, Manufacturing Surveys, the FOMC, Red 40 and Demographics
This Week in the Economy
Another mixed bag. Some up, some down (except interest rates, but I’ll get to that in a minute).
U.S. Retail Sales were down 0.9% for May vs. down 0.6% expectations and last month's drop of 0.1%.
You could argue that folks bought everything earlier to avoid the tariffs. It’s kind of like January being a down month after the Christmas season.
Automobiles were a big part of that. Take out auto sales, and retail sales are still down 0.3%. The reaction to tariffs is also a big part of that.
Initial jobless claims came in at 245,000 vs. the expectation of 246,000 and the previous week's 250,000. Keep an eye on that.
Both the Empire State manufacturing survey (from the New York Fed) and the Philadelphia Fed manufacturing survey were lower than the previous month, but…
The New York Federal Reserve Bank stated “Business activity continued to contract… However, employment grew slightly for the first time in several months. Firms also turned positive about the outlook for future business conditions, expecting activity to increase in the months ahead.”
This survey was done between June 2nd and June 9th.
From Philadelphia, the results were a mixed bag: 25% of firms reported increased activity, up from the previous month, 28% reported decreased activity, also higher than the previous month, and the number of firms that reported no change dropped from 58% to 44%.
With more knowledge about tariffs and trade, businesses are better equipped to make informed decisions, whether to grow or cut back.
Summed Up…
Manufacturing is still in contraction, with weaker orders and shipments.
The labor market is showing early signs of resilience
Inflation pressures are easing on inputs for manufacturers, allowing them to maintain their selling prices.
This will help with margins.
Both surveys showed a substantial increase in forward-looking optimism, suggesting that manufacturers are anticipating a rebound in late 2025.
Fingers crossed.
The Federal Open Market Committee – FOMC
Not to be confused with the state closed market committee, which is the primary advisor for California; they experiment with how many businesses they can get to close. But I digress.
The statement released Wednesday by the FOMC stated, “In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data blah blah blah blah…”
OK, they really didn’t say the blah blah blah part, and readers of this Report are likely more interested in the results rather than the steps to get there. So, here you are.
They didn’t change rates.
Boomer alert - In the words of Gomer Pyle, “Surprise, surprise, surprise.”
However, I’m going into the weeds, so stay with me.
There are 19 members of the FOMC: 7 members of the Board of Governors in D.C and the 12 presidents of each Federal Reserve Bank, such as the NY Fed, Philadelphia Fed, San Francisco Fed etc.
Jerome Powell is one of the 7 members of the Board and is the current Chair of the Federal Reserve Board.
Of the 12 presidents, only the NY Fed president is a permanent voting member. Of the remaining 11, only four can vote at any one time. The other seven rotate in and out of the voting committee annually.
So, there are 12 voting members of the FOMC. However, everyone participates in the meeting, and they are polled on where they think interest rates are headed.
By the end of this year:
7 members did not see any rate changes.
2 members saw a rate decrease of 0.25% .
8 members saw a rate decrease of 0.50%.
2 members saw a rate decrease of 0.75%
And there is your forecast. Twelve participating members forecasted rate decreases while seven did not. That’ll clear things up.
In-N-Out & Red 40
For those of you east of Texas, it’s unlikely you have heard of In-N-Out.
This is the original drive-thru hamburger chain.
By ‘drive-thru’, I mean with two-way communication. The first drive-thru was Red’s Giant Hamburg, in Springfield, Missouri, in 1947.
The chain has over 400 restaurants, predominantly in California, with locations in other western states and as far east as Texas, and soon to be Tennessee.
They advertise that they have the finest ingredients available. As it turns out, they are putting their money where their mouth is.
In an announcement a few weeks ago, they are making the following changes:
Replacing Red 40 with beta carotene and vegetable juice in their strawberry shakes and pink lemonade.
And I always thought strawberry shakes were pink because of the strawberries.
Replacing artificial vanilla with natural vanilla in their shake mix.
Replacing high fructose corn syrup with natural sugar in their shakes, spreads, and lemonade.
Replacing Yellow 5 with Turmeric in their pickles, chilies, and spreads.
And there are other substitutes as well. I’m not sure what the cost will be, but you can be assured of one thing: All the ingredients are fresh, never frozen!
And just this past week, Kraft Heinz and General Mills will also be removing artificial colors from their products.
I think it’s time for a Double-Double.
Demographics Revisited – Again – Part 1
In the long run, demographics run the economy. As an example, based on current demographics, there will be an increasing need for senior housing. That’s demographics driving the economy. At least the senior housing economy. And pharmaceuticals. At any rate…
Here are the population segments as they currently stand for the U.S., with a population of 341,960,000, based on estimates.
Boomers, 1946-64, 20-21% of the U.S. population, or 69,000,000, and 61 to 79 years old.
Gen Xers, 1965-80, 19-20% - 65,000,000 and 45-60 years old.
Millennials, 1981-96, 22% - 73,000,000 and 29-44 years old.
This is the biggest segment – so much for the Boomers.
Gen Z (Zoomers), 1997-2012, 20-21% - 69,000,000, and 13 to 28 years old.
Gen Alpha, 2013 to present, 12-13% - 40,000,000 and 0 to 12 years old.
In 2033, deaths will outnumber births in the USA.
The population could peak as early as 2043 or as late as 2080, depending on immigration.
Just think, by 2100, it’s a buyer's market for homes. And that’s how demographics drives economics.
More on this in the next Report, where I’ll talk about replacement birth rate. Spoiler Alert: 75% of countries are below the replacement birth rate.
There are many stock market mantras. One is “Sell in May and go away.” No, I did not sell, but I’ll probably focus less on economic numbers and more on economically driven stories over the summer; we’ll see how that works out. In the meantime, it is worth repeating that we are now in the Summer Selling Season, where prospects tell you to call back after Labor Day. I encourage you to take advantage of the fact that your competition will be putting forth less effort because of that fictional belief. Drop off a bottle of BBQ sauce, and next time, they may take your call. Or at least remember who you are when they don’t.
The way to get started is to quit talking and begin doing. – Walt Disney
So begin doing! Next week we officially enter the second half of the year!
