Quarterly Market Review: April - June 2019

• Employment: Total employment edged up 75,000 in May after adding 224,000 (revised) new jobs in
April. The average monthly job gain in 2019 was 164,000 per month (223,000 in 2018). Notable
employment increases for May occurred in professional and business services (33,000) and health care
(16,000). The unemployment rate remained at 3.6% in May after falling 0.2 percentage point in April.
The number of unemployed persons was little changed at 5.9 million. The labor participation rate was
62.8% and the employment-population ratio was 60.6% — both unchanged in May. The average
workweek was unchanged at 34.4 hours for May. Average hourly earnings increased by $0.06 to
$27.83. Over the last 12 months ended in May, average hourly earnings have risen 3.1%.

• FOMC/interest rates: As expected, the Federal Open Market Committee did not change interest rates
following its latest meeting in June. Lack of price inflation and slowing economic growth underscored the
Committee's reluctance to raise rates. In fact, there is a growing sentiment among Committee members
to lower rates in the near future, as projections released by the FOMC in June show the federal funds
rate range at between 1.9% and 2.4% by the end of 2019.

• GDP/budget: The third and final estimate of the first-quarter gross domestic product showed the
economy grew at an annualized rate of 3.1%. The GDP expanded at a rate of 2.2% for the fourth quarter
of 2018. Driving the growth rate increase was an upturn in nonresidential (business) fixed investment,
state and local government spending, and exports, coupled with a smaller decrease in residential
investment. These movements were partly offset by decelerations in consumer spending (0.9% in the
first quarter compared to 2.5% in the fourth quarter). The federal budget deficit was $207.8 billion in May
after enjoying a surplus of $160.3 billion in April ($146.8 billion in May 2018). Through the first eight
months of the fiscal year, the government deficit sits at $738.6 billion. Over the same period for fiscal
year 2018, the deficit was $532.2 billion.

• Inflation/consumer spending: Inflationary pressures remain weak as consumer prices are up 1.5%
over the last 12 months ended in May. Consumer prices excluding food and energy are up 1.6% over
the same 12-month period. For the month, consumer prices rose 0.2% over April, when prices increased
0.3%. In May, consumer spending rose 0.4% (0.6% in April). Personal income and disposable (after-tax)
personal income climbed 0.5% in May, respectively, matching the same increases as in April.

• The Consumer Price Index increased 0.1% in May after rising 0.3% in April and 0.4% in March. Over the
12 months ended in May, the CPI rose 1.8%. The food index rose 0.3% in May after declining in April,
with the food index accounting for nearly half of the May CPI monthly increase. The energy index fell
0.6% in May, with the gasoline index falling 0.5%. Core prices, less food and energy, also inched up
0.1% in May for the fourth consecutive month. Core prices have risen 2.0% over the 12 months ended in
May.

• According to the Producer Price Index, the prices companies received for goods and services rose 0.1%
in May after climbing 0.2% in April. The index increased 1.8% for the 12 months ended in May. The
index less foods, energy, and trade services moved up 0.4% in May, the same increase as in April, and
has increased 2.3% over the last 12 months.

• Housing: Activity in the housing market can be described as erratic at best. Existing home sales rose
2.5% in May after registering no change in April from the prior month. Year-over-year, existing home
sales remain down 1.1% (4.4% for the 12 months ended in April). Existing home prices continue to rise,
as the May median price for existing homes was $277,700, up from $267,300 the prior month. Existing
home prices were up 4.8% from May 2018. Total housing inventory for existing homes for sale in May
increased to 1.92 million, up from 1.83 million existing homes available for sale in April and 2.7% ahead of sales a year ago. Sales of new single-family houses fell a whopping 7.8% in May following an April
dip of 3.8% (revised). New home sales are now 3.7% below their May 2018 estimate. The median sales
price of new houses sold in May was $308,000 ($342,200 in April). The average sales price was
$377,200 ($393,700 in April). Inventory at the end of May was at a supply of 6.4 months (5.9 months in
April).

• Manufacturing: According to the Federal Reserve, industrial production rebounded in May, rising 0.4%,
after falling 0.4% in April. In May, the indexes for manufacturing and mining gained 0.2% and 0.1%,
respectively, while the index for utilities climbed 2.1%. Total industrial production was 2.0% higher in
May than it was a year earlier. After showing signs of life during the first quarter, durable goods orders
fell 1.3% in May after dropping 2.8% (revised) in April. New orders for transportation equipment drove
the decrease, plummeting 4.6% for the month.

• Imports and exports: In another sign that inflationary pressures are weak, import prices fell 0.3% in
May after advancing 0.1% in April. This is the first monthly decline since a 1.4% decline in December.
Import fuel prices declined 1.0% in May, after rising 25.4% over the previous four months. Nonfuel
import prices were also down, falling 0.3% in May. Year-to-date, import prices are down 1.5% — the
largest year-over-year decline since August 2016. Prices for exports dropped 0.2% in May following a
0.1% bump in April. Export prices have fallen 0.7% since May 2018. The latest information on
international trade in goods and services, out June 6, is for April and shows that the goods and services
deficit was $50.8 billion, down from the $51.9 billion deficit in March. April exports were $206.8 billion,
$4.6 billion less than March exports. April imports were $257.6 billion, $5.7 billion less than March
imports. Year-to-date, the goods and services deficit increased $4.1 billion, or 2.0%, from the same
period in 2018. Exports increased $8.3 billion, or 1.0%. Imports increased $12.4 billion, or 1.2%. The
advance report on international trade in goods (excluding services) revealed the trade deficit to be $74.5
billion in May, up from the $70.6 billion deficit in April. Goods exports in May were $4.1 billion more than
the prior month, while imports of goods were $7.8 billion more than April's goods imports.

• International markets: Escalating tensions between the United States and Iran have added to the
already nervous world economy. In response to another round of tariffs imposed by the United States,
China is lowering tariffs on imports it receives from other countries, while raising duties on imports
received from America. The United Kingdom's gross domestic product fell sharply in April, down 0.4%,
which marks the steepest drop since March 2016.

• Consumer confidence: The Conference Board Consumer Confidence Index® fell to 121.5 in June,
down from May's index of 131.3. The Present Situation Index — based on consumers' assessment of
current business and labor market conditions — decreased from 170.7 to 162.6. The Expectations Index —
based on consumers' short-term outlook for income, business and labor market conditions — decreased
from 105.0 last month to 94.1 in June.