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Job Openings Set Records

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The Labor Department's Job Opening and Labor Turnover Survey (JOLTS) report for April marked a couple of milestones. While the report showed a record 6.7 million unfilled jobs in April, revisions to March's report showed that, for the first time since tracking began in 2000, the number of open jobs was greater than the number of people unemployed. March's gap of 48,000 jumped to 352,000 in April. The JOLTS report lags by a month, so barring a major revision to April's number, the gap is likely to widen for May, as the unemployment rate dipped to 3.8 percent.

Other Key Indicators this Week:

Factory and Durable Goods Orders – The Commerce Department's report on orders placed with U.S. factories in April shows orders declined 0.8 percent. Factory orders minus orders for transportation goods (aircraft, autos, etc.) were up 0.4 percent. The Department's final report on orders for durable goods in April shows they dropped 1.6 percent. Excluding orders for transportation goods, orders were up 0.9 percent month-over-month. Excluding orders for military goods and aircraft, orders increased 1.0 percent.

ISM Services Index – The Institute for Supply Management (ISM) reports its broad index of activity in non-manufacturing industries (services) rose to a 58.6 reading in May from 56.8 in April. This indicates an increase in the pace of growth in the service sector. The ISM's service sector employment index rose from a 53.6 reading to 54.1.  The ISM's broad index of services is based on readings from four equally weighted indices: business activity, new orders, employment, and supplier deliveries. The broad index has shown modest monthly growth since January 2010, averaging 55.5. The index consistently showed decline in the sector from January 2008 through January 2010, averaging a 46.9 reading. Service industries comprise close to 90 percent of the U.S. economy.

Balance of Trade – The Commerce Department reports the U.S. balance of trade with foreign nations, the so-called trade gap, narrowed by 2.1 percent in April, from $47.2 billion to $46.2 billion. Exports increased 0.3 percent, and imports decreased 0.2 percent. The largest percentage change in exports was a 5.6 percent increase in the food and beverage sector. The largest dollar change in exports was a $1.42 billion decline in capital goods, followed by a $1.34 billion rise in industrial supplies. Among imports, the largest percentage change came in consumer goods, down 5.1 percent. The largest dollar change in imports was also in consumer goods, down $2.78 billion.

Strategically for Credit Unions:

Overall, the week's numbers show continued strength in the U.S economy, but some pundits are warning of potential pitfalls, and talk of tariffs and trade wars has dominated the week's news cycle. Former Fed Chairman Ben Bernanke said the economy will face challenges once the current fiscal stimulus fades; it "is going to hit the economy in a big way this year and next, and then in 2020. Wile E. Coyote is going to go off the cliff." There is also concern that the Fed's apparent plan to bump rates two or three more times this year may be too aggressive, considering how flat the yield curve remains. It won't hurt credit unions doing long range planning to factor in the potential of recession in 2020, or even sooner – "meep meep."
Dan Abdill – Senior Investment Officer

Although this information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. All herein listed securities are subject to availability and change in price. Past performance is not indicative of future results. Changes in any assumption may have a material effect on projected results.