Employers may be pulling back on hiring in anticipation of a slowing economy, but the labor market remains tight. Job openings were 9.8 million at the end of May, 496,000 below their April level.
Why it matters: Employers still face a serious worker shortage. There are 3.7 million more job openings than unemployed workers.
By the numbers:
- Openings increased in educational services (45,000), state and local government education (37,000), and federal government (24,000).
- Openings decreased in health care and social assistance (285,000), finance and insurance (139,000), and other services (78,000).
Dig deeper:
- The Chamber’s America Works Initiative helps employers across the country develop and discover talent to fill open jobs and grow our economy.
Durable Goods Orders Surge
June 30, 2023
New orders for durables goods are on a strong run. They surged 3.3% in March, rose 1.2% in April, and increased 1.7% in May. This trend is an encouraging sign for the economy.
Why it matters: Durable goods are an important economic indicator because they are long-lasting, more expensive items that consumers and businesses purchase.
Be smart: Consumers and businesses buy more of them when they feel better about their long-term prospects and that of the broader economy. They often use credit to buy them due to their large price tags.
- For consumers, they include computers, appliances, and cars.
- For businesses, durables include bigger items like airplanes, heavy machinery, and other capital goods necessary to manufacture products.
By the numbers: All categories of durables saw gains in May. Some of the bigger increases came in cars (2.2%) and airplanes (33%). Capital goods (excluding planes) rose a respectable 0.7% on the month.
Bottom line: The last three months of impressive sales of durables tells us businesses and consumers have confidence the economy will be strong going forward.
Offices are Still Less than 50% Filled
June 28, 2023
Workers’ reluctance to come back to the office is causing a major disruption in the office space market. Offices in ten large cities were occupied at less than 50% of their pre-Covid occupancy rate, according to the security company Kastle.
Why it matters: The drop in occupancy, coupled with higher interest rates, is causing the value of office buildings, particularly in downtown urban areas to drop.
Big picture: This will create problems for lenders that are heavy financers of office buildings. They may face losses as building owners walk away from underperforming buildings.
- However, those lenders are well-capitalized to absorb the losses. And the potential pain should be concentrated. Office space makes up only 15% of the entire $21 trillion commercial real estate market, according to Nareit estimates.
Looking ahead: The downturn in the office space market should be short-lived. When workers come back into the office more and interest rates fall – perhaps late next year – demand for office space will rebound.
ICYMI: The Chamber’s Future of the Office survey finds that government red tape is a major barrier to converting empty office space.
The Future of the Office Hindered by Regulations
June 23, 2023
Permitting and environmental regulations will limit efforts to convert offices into residential or new commercial space, according to the Chamber’s Future of the Office survey.
Why it matters: These barriers hold businesses back from modernizing valuable office real estate.
- Work-from-home is here to stay following the pandemic and is causing businesses to reevaluate how much space they use and how they use it.
According to the survey, 46% say zoning and/or permitting issues impact office building conversions, and 44% say the same about environmental regulations.
- These concerns rank almost as high as the impact of building layouts (47%) and floor plan configurations (42%) on office conversions.
The appetite is strong. Seven in ten builders (71%) and two in three architects (68%) are receiving more frequent requests to convert existing office space to different uses.
- While conversion to housing is one possible use for empty offices, more than half of architects surveyed (54%) say that converting office spaces into other commercial uses will be a trend in the coming year.
Our take: Cities who want to adapt and thrive will look to reform their zoning, permitting, and environmental reviews to make it easier to convert what would otherwise be vacant office space to retail, hospitality, entertainment space, or housing.
Economy Keeps Surprising Despite Inflation, Higher Interest Rates
June 21, 2023
We are nearing the end of the second quarter. Despite the headwinds, the economy continues to chug along at a decent pace, exceeding expectations.
- The Atlanta Federal Reserve’s real-time economic tracking model shows the economy is growing by 1.9%.
- According to the Chamber’s Economic Growth Model, the economy will grow by 1.1% in the second quarter.
Big picture: The combination of continued consumer spending and sustained job creation and wage growth is more than keeping the economy afloat.
Why it matters: There is still a likelihood of a slowdown in economic growth later this year because of inflation and higher interest rates. The Chamber forecasts the economy will contract slightly in the third and fourth quarters this year, meeting the definition of a recession.
- However, given the underlying strength of the economy, any slowdown or a recession is likely to be short-lived and mild.
Retail sales rose 0.3% in May. In April, sales rose 0.4%.
June 16, 2023
Why it matters: Retail sales declined in February and March after a big jump in January. Two months of consecutive growth is encouraging.
But: Consumers’ ability to spend is still likely to decline as the year goes on. Inflation is only now slightly below wage gains and savings are spent down while credit card balances have risen sharply.
By the numbers:
- Sales were up at motor vehicles and parts dealers (1.4%), furniture stores (0.4%), electronics and appliance stores (0.2%), building material and garden supply stores (2.2%), food and beverage stores (0.3%), sporting goods and hobby stores (0.3%), general merchandise stores (0.4%), non-store retailers (mostly online sellers) (0.3%), and food and drinking places (0.4%).
- Sales were down at gas stations (2.6%) and miscellaneous stores (1%).
Looking ahead: A robust job market could put a floor beneath consumer spending and keep it stronger than in previous economic slowdowns.
Inflation Came Down in May But Was Still High
June 14, 2023
The Consumer Price Index, the broadest measure of consumer prices, rose 4% annually in May but was down from April, when it was 4.9% and well down from the peak of 9.1% in June 2022.
- On a monthly basis, inflation rose 0.1% from April to May. This is a drop from March to April when prices rose 0.4%.
Why it matters: Despite the progress, inflation remains well above the 2% target and the underlying data is more concerning.
- Core prices, which strip out volatile elements like food and energy, rose 5.3% on an annual basis and 0.4% from April to May.
- The Federal Reserve looks more closely at core prices than the overall inflation number.
Looking ahead: The Fed could still pause interest rate hikes at its meeting this week, but if core prices continue to remain high, it will have to resume rate increases, perhaps as soon as July.
Credit Card Debt Surges in April
June 9, 2023
Consumers are spending up their credit card balances at a sharp rate. In April, they rose 1.1%, and in March they rose 1.2%.
Why it matters: This could have significant repercussions for consumer spending and economic growth.
- The big picture: During Covid, consumers paid down their credit card balances by $127 billion.
- Consumers added $272 billion to their credit card balances since March 2021. Balances are now 13% larger than their pre-Covid peak.
However, income has grown in that period. As a share of income, credit card debt is still below its pre-Covid level and well below its average over the last 20 years.
Looking ahead: Consumers can’t add much more to their card balances, especially with tightening credit standards. Credit will be less able to bridge the gap between inflation and wages (inflation is still rising faster than wages). This could put downward pressure on consumer spending, which would also put downward pressure on economic growth.
Read more from the Chamber:
- Economic Data: Comprehensive quantitative snapshots of business sectors and topics to help business and political leaders make informed decisions.
- Workforce Data:Capturing the current state of the U.S. workforce.
- Small Business Index: The MetLife & U.S. Chamber of Commerce Small Business Index is released on a quarterly basis and is compiled from 750 unique online interviews with small business owners and operators each quarter. The Index delivers a comprehensive quantitative snapshot of the small business sector as well as explores small business owners’ perspectives on the latest economic and business trends.
- Middle Market Business Index:The survey panel consists of approximately 1,500 middle market executives and is designed to accurately reflect conditions in the middle market.
About the authors
Curtis Dubay
Curtis Dubay is Chief Economist, Economic Policy Division at the U.S. Chamber of Commerce. He heads the Chamber’s research on the U.S. and global economies.
