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LPL Prediction Update

A few weeks ago, we presented a summary of LPL’s predictions for the current bull market, looking at five indicators known as the “Five Forecasters”: the Conference Board’s Leading Economic Index (LEI), the US Treasury’s Yield Curve, market breadth, market valuation, and the Purchasing Managers’ Index (PMI). (Missed this blog? Check it out here!)
Today, we’d like to share with you an article we felt was a great complement to that summary. The article, written by AP Economics Writer Josh Boak, was shared by WRAL News just this morning, and can be found here.
According to Boak, the month of April saw a hiring increase of 164,000, which lowered the overall unemployment rate to 3.9 percent. This is, by the way, the lowest rate since December 2000. The unemployment rate for African-Americans—6.6 percent—is the lowest recorded since 1972.
As a result of the low unemployment rate, economic experts believe wage growth will begin to climb in the coming months. Why? As unemployment falls, there is a diminishing job pool of qualified workers, which means employers will be forced to hire at higher wages in order to attract the best employees, and some may even need to increase wages for current employees to ensure good employees aren’t tempted to look elsewhere. Boak quotes Andrew Chamberlain, chief economist at Glassdoor, as saying, “It’s just not sustainable for average pay growth to be so low in a labor market this tight.”
Boak makes sure to point out that 24,000 workers were hired in the manufacturing industry in April. Why? As noted in the previous blog, “ In the past, the peak of manufacturing has preceded recession by a period of nearly four years.” Thus, economists carefully watch trends related to manufacturing growth or decline, especially with respect to the trade and material tariffs that went into place recently. Boak’s inclusion shows manufacturing growth is still strong, and indicates speculative fears regarding the impact of the tariffs are not yet negatively impacting the industry.
Inflation, Boak reports, HAS increased slightly; however, this comes as no surprise, as many people expected the rate to begin creeping up once the economy showed stable recovery from the 2008 “financial crisis”. To follow the small increase in March, at least two more small increases are expected by the remainder of the year.
As we continue to watch these financial trends, we really don’t see commercial projects slowing noticeably. Interest rate increases may provide a bit of pause to a small segment of commercial investors, but the increases are slow and predictable enough that they will most likely not prove to be a negative impact on the industry for some time. It is still a great time for companies to look into building expansions and new land acquisitions.

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