More and more, it’s starting to look as if the risk that Greece will default on its debt is among relatively few serious short-term threats to a strengthening U.S. economy.
Starting with the May employment report, which showed a gain of 280,000 jobs, the most since December, and an 8-cent increase in average hourly earnings, a string of positive numbers have added to evidence that the economy is rebounding from a first quarter that was weak, but not quite as anemic as initially thought.
Auto sales rose 1.6 percent in May, to about 1.63 million. The seasonally adjusted annual rate for the month was 17.8 million, the highest since July of 2005. The Commerce Department said consumer spending rose 0.9 percent in May, buoyed by the demand for cars and other big-ticket goods. It was the largest gain since August 2009, and it came after an increase of just 0.1 percent in April.
"This portends well for second-quarter growth and the broader momentum of economic activity in the second half of the year, and keeps the prospect of a September rate hike squarely on the table," Anthony Karydakis, chief economic strategist at Miller Tabak in New York, told Reuters.
Last Friday, the University of Michigan’s consumer sentiment index for June rose to 96.1, a five-month high, from 90.7 in May. Bloomberg said the figure for June was the second-highest since January of 2007.
“Consumers are feeling confident about their job and income prospects,” David Berson, chief economist at Nationwide Insurance in Columbus, Ohio, told Bloomberg. “Consumer spending is going to look pretty good in the second quarter.”
The Commerce Department said June 11 that retail sales rose 1.2 percent in May, compared with April, and they were up 2.7 percent from May of 2014. When gasoline and auto sales are excluded, retail sales were up 0.7 percent for the month, and that result was better than economists expected.
Last week, two reports displayed the strength of the housing market. The National Association of Realtors said sales of previously owned homes rose 5.1 percent from April, to a seasonally adjusted rate of 5.35 million.
A day later, the Commerce Department said sales of new single-family homes rose 2.2 percent in May, to a seasonally adjusted annual rate of 546,000 units, the highest level since February of 2008. April’s sales pace was revised up to 534,000 from a previously reported 517,000.
“Look for significant increases in housing starts — we have to catch up to these demand numbers,” Aneta Markowska, chief U.S. economist at Societe Generale in New York, told Bloomberg. “This could be the best year for housing in terms of how much it contributes to GDP since 2012.”
There were plenty of first-time buyers in the home resales market. In a promising development for boatbuilders and other sellers of big-ticket goods, the Realtors’ trade group said first-time buyers rose to 32 percent of all buyers from 27 percent a year earlier.
The Wall Street Journal said significant growth in home prices and sales likely requires new buyers, arguing that a stronger existing-home market can help shape the wider economy. Homeowners buy major appliances and use their homes to finance other sizable purchases.
“If you take first-time buyers out of the equation, then all you’re doing is shuffling deck chairs around,” Stephen Stanley, chief economist at Amherst Pierpont Securities, told the Journal.
Also last week, the Commerce Department said the economy contracted to a lesser degree in the first quarter than the government initially thought. Gross domestic product declined at an annual rate of 0.2 percent, which was an improvement from the 0.7 percent contraction that was first reported.
Guy Berger, U.S. economist at RBS in Stamford, Conn., told the New York Times that he expects expansion to occur at an annual rate of about 3 percent during the three remaining quarters this year. If that proves true, the annual growth rate for all of this year would be 2.2 percent.
“We’re very focused on the labor market — that’s the single most important bellwether for the economy,” Berger said. “As long as the job market remains healthy, that should spill over into healthier consumer spending.”
The Labor Department will issue its unemployment report for June on Thursday, just before the holiday weekend. Economists believe we’ll have something to celebrate — another month of job growth exceeding 200,000.