Category Archives: Uncategorized

February Consumer Confidence, January Durable Good Orders and December Home Prices

KEY DATA: Confidence: +6.5 points/ Orders: -3.7%; Excluding Aircraft: -1.2%; Capital Spending: -0.2%/ FHFA Prices (Over-Year): +6.7%/ Case Shiller (Over-Year): +6.3%

IN A NUTSHELL: “Consumers are exuberant and hopefully that will translate into more spending as firms don’t seem to be cranking up their investment activity.”

WHAT IT MEANS: There are lots of smiles on the faces of consumers these days. The Conference Board’s Consumer Confidence Index jumped in February, reaching the highest reading in over seventeen years. That was when the bubble started to burst in everyone’s face. The views on both current and future conditions were up sharply, a very positive sign. We will find out Thursday, when the January consumption numbers are released, if the good feelings are translating into better spending.

I suspect that sometime in the future, businesses will spend some of the massive increase in after-tax earnings on capital goods, but as of now, there are no signs that is actually happening. Durable goods orders crashed in January, but that was due to a huge drop off in commercial aircraft purchases. Don’t worry, Boeing is doing just fine. But aircraft was not the only weak sector. Demand was also down for machinery, electrical equipment, appliances and primary metals. Purchases of computers and communications equipment did jump and orders for vehicles edged upward. But the closely watched measure of capital spending, orders for non-aircraft, nondefense capital goods, declined for the second consecutive month and have really gone nowhere for the past three months. Maybe firms were waiting for the tax law to pass and it is taking them time to determine exactly what they should spend their profits on, but it would be nice if this measure were actually rising.

Two reports on housing prices were released today and both tell basically the same story: Housing prices are rising sharply. The Federal Housing Finance Agency’s December and fourth quarter data indicated that prices rose modestly in December but were up quite strongly over the year. The S&P CoreLogic Case-Shiller National Index was up slightly less over the year, but the difference was not huge given the way prices are measured.

MARKETS AND FED POLICY IMPLICATIONS: Feeling good is nice and having corporate coffers filled to the brim could also be good, but those two things have to actually lead to additional business and consumer spending if the economy is to grow more rapidly. So far, there is little indication that has happened. Of course, it has not been that long since the tax bill passed, so we need some patience.   Increasing capital spending only makes sense if it increases earnings and exactly how to invest is not a simple decision. Similarly, for most workers, the increase in after-tax pay will kick in slowly over the year. So don’t expect a sudden surge in either consumer or capital spending. And with the new Fed Chair making it clear that market volatility will not deter the Fed from its rate and balance sheet normalization plan, look for rates to continue to rise. When that is combined with sharply rising housing prices, the outlook for construction becomes a little clouded. In other words, growth this year should be strong, maybe even in the 3% range, but to get there, current business and consumer spending patterns have to change.  

January Existing Home Sales

KEY DATA: Sales: -3.2%; Over-Year: -4.8%; Prices (Over-Year): +5.8%; Inventory (Over-Year): -9.5%

IN A NUTSHELL: “When you add rising mortgage rates to surging prices and a lack of inventory, it is hard to see that home sales will boom anytime soon.”

WHAT IT MEANS: The housing market has been solid and it remains that way, but there are holes developing in the story that residential real estate will be a leading factor in growth this year. The National Association of Realtors reported that existing home sales were off in January, the second consecutive drop. The declines came after a very strong November number, so maybe the easing in sales could have been expected. Sill, if you average the last three months, the sales pace was only slightly above the 2017 rate, which is not a sign of strength. We cannot really blame weather for the January slump as sales were off in all four regions of the country. The problem is that there are simply few homes on the market. While the inventory did rise a bit in January, it is still way off the level seen the previous January, and that was pretty low. With few homes to purchase, buyers are bidding up prices, which continue to rise sharply. They are up by about 7% or more in three of the four regions, with only the South posting a moderate increase.

MARKETS AND FED POLICY IMPLICATIONS: For months, maybe even years now, we have blamed the lack of homes on the market for the relatively low level and modest rise in the sales of homes. And those explanations still make sense. People are just not moving and it is hard for buyers to find the house that they want. And now, interest rates are starting to rise. So, what will happen to the market? First, I do not subscribe to the belief that mortgage rates above 4.5% are a death knell to demand. As I have noted before, the housing bubble formed when rates were between 5.5% and 6.5%. But back then, supply was ample. Now it isn’t. The combination of low inventory and rising rates does not bode well for prices. But not what would be expected: Prices could surge! Buyers have been comfortable biding their time, as rates have been low and stable for so long. But a clear upward trend in mortgage costs would likely cause fence sitters – both those who are already in the market as well as those considering getting into it – to take the leap. That would bid up prices. Hopefully, those higher home values will induce owners to consider selling and given the changing locational preferences of boomers, that is very possible. Without added supply, we could be in for a boom then a bust in housing prices, if mortgage rates jump. I don’t see that happening, though, until late this year or the first half of next.

January Industrial Production, Producer Prices and Weekly Jobless Claims

January Industrial Production, Producer Prices and Weekly Jobless Claims

KEY DATA: IP: -0.1%; Manufacturing: 0%/ PPI: +0.4%; Less Food and Energy: +0.4%; Goods: +0.7%; Services: +0.3%/ Claims: +7,000

IN A NUTSHELL: “Business confidence may be sky-high, but it would be better if actual business activity was growing faster.”

WHAT IT MEANS:   “Watch what I do, not what I say” is the phrase we should be thinking about right now. Surveys are showing businesses are exuberant. According to the National Federation of Independent Business Chief Economist Bill Dunkelberg, “The historically high index readings over the last year tell us small business owners have never been more positive about the economy”. Similarly, the most recent Conference Board Measure of CEO Confidence jumped. Well, what is happening in reality? Apparently, not much. Overall industrial production declined in January and manufacturing output was flat for the second consecutive month. That is hardly a sign of a booming economy. There were some strong sectors. Motor vehicle assembly rates increases, helping power a rise in metals output. There were also solid increases in the production of petroleum, textiles, electrical equipment, computers and appliances. A rebound in business equipment output implies that businesses may be ramping up investment spending. But that is still to be seen.

Meanwhile, the drumbeat of higher inflation is getting louder. The Producer Price Index jumped in January, the fifth time in sixth months the index was up by at 0.3%. Yes, energy prices soared, but excluding that sector, prices still rose solidly. Over the year, wholesale prices increased 2.7% and just about every special segment of producer costs has posted gains in excess of 2%. In other words, the price increases are spread across the entire economy.

Weekly jobless claims rebounded last week, but that was from historic lows, so the rise doesn’t mean much. Businesses want to retain workers and the incredibly low level of claims supports that view.

MARKETS AND FED POLICY IMPLICATIONS: After a short scare, investors seem more than willing to look past things such as accelerating inflation and rising interest rates and focus on what they believe will be the never-ending benefits from the tax cut legislation. But it does appear as if higher inflation is here to stay. The latest surveys by the New York and Philadelphia Federal Reserve Banks found that about half of the respondents expect to get higher prices for their goods in the next six months, while very few thought prices would fall. In the Philadelphia report, a special question on prices and compensation showed that inflation expectations increased from three months ago. This should be a concern for Fed members, who consistently argue that inflation expectation are “well anchored”. Well, maybe that anchor is started to come loose. While equity investors are shrugging off the inflation data, the bond markets are not. The ten-year Treasury note hit its highest rate in over four years while the 2-year note reached a 9½-year high. Just a few months ago, before the surge in rates, many investment “gurus” were saying the economy would crash and burn if we got to 3% on the 10-year. Yet here we are with a rate that is just a few basis points from 3% and the equity markets are rising. So, is the exuberance in the stock markets rational or irrational? Where is Alan Greenspan when we really need him? I hardly expect new Fed Chair Powell will be making any comments that could roil the markets, even if he should be asking some really hard questions.

January NonManufacturing Activity and Employment Trends Index

KEY DATA: ISM (NonManufacturing): +3.9 points; Orders: +8.2; Employment: +5.3 points/ ETI (Over-Year): +5.4%

IN A NUTSHELL: “The non-manufacturing portion of the economy seems to be kicking it up a notch and that bodes well for growth this year.”

WHAT IT MEANS: The economy is in really good shape, which is odd given that investors seem to be suddenly worrying about things. The manufacturing sector, though not booming, is solid while the service sector is getting even better. The Institute for Supply Management’s NonManufacturing Index jumped in January, led by a resurgence in new orders. To meet the growing demand, hiring is accelerating. Even better, order books are starting to fill even further. In other words, conditions are go for this segment of the economy.

The improving condition of the economy, which was already good to start with, is driving up demand for workers. The Supply Managers’ survey was not the only one to show that. The Conference Board’s Employment Trends Index rose strongly in January and is up sharply over the year. The implications are clear: Conditions will only getter better going forward. Or, as was stated in the report, “The Employment Trends Index continues its solid path upwards and shows no sign of slowing down”.

MARKETS AND FED POLICY IMPLICATIONS: The stock markets may finally be starting to focus on the real side of the economy, which may explain some of the current correction. As I have noted, expansions don’t simply fade away. They are caused by either bubbles bursting, such as the tech and housing bubbles, or policy mistakes, such as the Fed jamming on the brakes. But while investors have celebrated, and rightly so, the massive corporate tax cuts, economists have worried that expansionary fiscal policy piled on top of a solid economy and labor shortages could be categorized as a policy mistake. And the Fed members may be seeing that as well as their focus on inflation seems to have intensified. What needs to be determined is whether the acceleration in activity is too much of a good thing and if it is, how much is the ‘too much’. The course of both inflation and wages over the past couple of years has not conformed with normal economic theory. For every theory there is a counter-argument. For example, I have heard the argument that the number of people in the 24-55 age group who are not in the workforce is unusually large and that may represent a major source of potential labor. In rebuttal, it is argued that many of those people cannot pass a drug or background check and have given up looking for work because they know they will not be hired. Which is the correct interpretation? We don’t know, because the data on the characteristics of the unemployed, at least as it comes to drug or background issues, doesn’t exist. Yet it is critical because it speaks to the extent of the actual labor shortage and the impact of the tax cuts not just on economic growth but on wage and price inflation and the potential course of interest rates. The lack of clarity about growth and inflation is likely to create a lot more volatility going forward.


December Producer Prices and Weekly Jobless Claims

KEY DATA: PPI: -0.1%; Goods: 0%; Services: -0.2%/ Claims+11,000

IN A NUTSHELL: “Falling food and trade costs are helping keep producer expenses under control.”

WHAT IT MEANS: With the 10-year Treasury note approaching levels rarely seen in the past 3½ years, questions are being raised about how high it will go over the next year. Implementing expansionary fiscal policy when the economy is growing decently and the labor market is tight is a risky experiment, as it raises the risk that inflation could accelerate faster than expected. But those effects are not likely to be seen right away since it could take months before the tax cuts make much of a difference in consumption. It actually has to show up in paychecks and then be spent. Until that happens, we have to watch leading indicators of consumer prices and the Producer Price Index is one of them.

Wholesale costs fell in December, led by a sharp decline in food prices. I am not sure what is going, but the drop was broad based as thirteen of the twenty food sectors posted declines. I expect that drop will be reversed pretty quickly. Energy costs were flat and we know that oil prices have surged lately. On the services side, trade costs cratered. I suspect that the decline was overdone, but wholesale and retail services are likely to remain well contained for a long time. However, transport costs are likely to keep surging. Basically, this report, while looking tame for now, could look a lot different next month. And going forward, don’t be surprised if producer prices keep trending upward as intermediate prices are rising more strongly than finished goods and services prices. There are cost pressures building in the pipeline.

New claims for unemployment insurance jumped last week and the trend is slightly upward. That is strange given all the other data on layoffs. In addition, the number of claims was up compared to last year. They had been down over the year for about eight years. It is too soon to say a trend is developing, but it is worth watching.

MARKETS AND FED POLICY IMPLICATIONS: Energy costs are rising, but there doesn’t appear to be any major, widespread acceleration in producer prices. Indeed, the tax breaks should provide an earnings cushion so businesses have the capacity to limit price increases even if expenses rise. Thus, it is hard to see that inflation will soar anytime soon. But pressures are building and stronger growth will only exacerbate the problem. I do think that consumer inflation will hit the Fed’s 2% target by mid-year and start consistently exceeding it during the second half of the year. But until that happens, the Fed has some room to allow prices to rise. As for investors, any excuse to keep the rally going will be used and now that we are in earnings season, there may be lots of reasons for equities to do well. I expect that fourth quarter earnings were strong.

December Small Business Optimism and November JOLTS report

KEY DATA: NFIB Index: -2.6 points/ Job Openings: -46,000; Hires: -104,000; Quits: -13,000

IN A NUTSHELL: “Despite a modest decline in optimism, small business owners remain exuberant and that should lead to greater job growth, if they can find the workers.”

WHAT IT MEANS: Small is good, at least when it comes to job creation, so near record levels of small businesses optimism is something to celebrate. Yes, the National Federation of Independent Businesses Small Business Optimism index did recede in December, but it remained near record highs. That was reached right after the Reagan tax cuts were passed, so you can probably say that small business owners are big on tax cuts. They would like to hire more workers, but they continue to be constrained by the lack of qualified workers, especially in construction and manufacturing. What is interesting in the report was the difference between actual conditions and optimism. Earnings growth is slowing, sales are moderating and costs, especially wages and compensation, are rising. Yet there is optimism about future sales. Owners are making plans to hire more workers, yet 54% of the respondents said they could find few or no qualified applicants. As for capital spending, there has yet to be a surge in plans to invest.

The lack of workers that small businesses are finding is a universal issue. While the number of job openings eased in November, it remained extremely high. It is likely the slowdown in hiring is due to the lack of labor turnover. Despite what appears to be an employee market, workers are just not quitting their jobs and making themselves available to the highest bidder. On top of that, the rate of layoffs and discharges is almost at an historic low. There is just no churn in the market and that is restricting the ability of companies to find “qualified” workers.

MARKETS AND FED POLICY IMPLICATIONS: Over the next few months, workers will start seeing their paychecks boosted by the tax changes. For some it will be minimal but for many it may be enough to generate stronger spending. Meanwhile, businesses will be making plans for the surge in after-tax earnings that will be staying in their bank accounts. We are seeing a variety of announced plans, ranging from workers bonuses to massive stock buybacks. What is likely coming is a flood of mergers and acquisitions. In a perverse way, that may be good for the labor market as lots of workers will lose their jobs, adding to supply. It is going to take a long time for the effects and consequences, intended or not, of the tax changes to become clear. Until then, the exuberant investor will likely remain that way. As for the Fed, it looks like it still is all about inflation or expected inflation. I suspect it will take an extended period of above target price increases to get the Fed to tighten as many as three to four times this year. But that is not out of the question. My forecast of at least three moves last year won me lunch and I am betting another lunch on four moves this year.

December Jobs Report and November Trade Deficit

KEY DATA: Payrolls: +148,000; Private: +146,000; Revisions: -9,000; U-Rate: 4.1% (Unchanged); Wages: +0.3%/ Trade Deficit: $1.6 billion wider

IN A NUTSHELL: “While the headline job gain number may have disappointed, the average over the last three months was still very strong.”

WHAT IT MEANS: We are starting to get the final 2017 data with the first big one being the jobs numbers. To many, the 148,000 jobs created was a disappointment. But this is a classic example of why you need to understand the pattern of the data, not just look at headline number. Yes, there were fewer positions added than many had forecast, but the jobs numbers are volatile. Over the last three months, an average of 204,000 new positions were created. That is very strong job growth that is likely not sustainable. In December, the job gains were led not just by health care, but also by robust increases in construction and manufacturing. These sectors are helping carry the load and show that the fundamental economy is in good shape. They also offset a large decline in the faltering retail sector.

A second reason to be confident about the economy is the unemployment rate, which remained at an extremely low 4.1%. As a result, wage increases are picking up. The 2.5% increase over the year may not be as high as most workers would like, but it is getting there. The stable participation rate is also a good sign. It is likely that a growing number of people are entering the workforce as to offset the rising boomer retirement rate. Still, with the labor force expanding at a modest 0.5% pace over the year, it will be hard to maintain strong job and economic growth for a sustained period.


While the trade deficit widened again in November, it did so for all the right reasons. The world economy is finally in synch and that means we have growing markets across the world. Exports expanded solidly with every major category posting gains. The rise was not simply due to increasing petroleum prices. But the strong U.S. economy is also sucking in goods from the far corners of the world and as is usually the case, doing so faster than we can sell to foreigners. The only category of imports that was down was food.

MARKETS AND FED POLICY IMPLICATIONS: Supposedly, there is a vast army of potential workers sitting around who have skills, who can pass drug and background checks and who want to work. If you believe that, I am selling even more shares in my next Broadway show. The idea that the “animal spirits” will cause job growth to soar would make sense if there weren’t a shortage of workers already. Unless companies are making up the story that their biggest problem is finding qualified workers, we are not likely to see the hoped-for 200,000 or more job gains per month. Firms are already laying few people off so they may have to find ways to keep people from retiring or quitting. That can only be done by making it worth the workers’ while to stay on. In other words, by paying up. To the extent bonuses are used and that doesn’t show up in average hourly wages, we may be looking at bad wage data. So, watch the quarterly Employment Cost Index, which next comes out on January 31st. That does a little better job at getting at total compensation. This is important because it is clear from the latest Fed minutes that there is a schism at the Fed over how much to raise rates this year. Accelerating labor compensation costs would worry even the doves at the Fed. So, don’t assume the less than expected headline job growth number will be a moderating factor in Fed rate hike thinking.

December Private Sector Jobs, Layoff Notices and Weekly Unemployment Claims

KEY DATA: ADP: +250,000/ Layoffs: 32,423/ Claims: +3,000

IN A NUTSHELL: “If this is not a tight labor market, I don’t know what is.”

WHAT IT MEANS: Tomorrow is employment Friday and it will provide us with another reading not just on job gains but also on wages. But first we need to see if demand for workers is holding up and it looks like that is the case. ADP’s reading on private sector job gains for December came in well above expectations. The increases were robust in both small and mid-sized business, while larger firms added jobs solidly. Looking across industries, only the information services sector posted a decline. Construction, manufacturing, professional and business services, trade and health care all added lots of new workers. In other words, the labor market is in great shape.

A clear indicator of how tight the labor markets are is the Challenger, Gray and Christmas job cut report. December layoff notices were modest and the total for the year was down by over 20% from the 2016 pace to the lowest level since 1990. Helping out was the rise in energy prices and the energy sector’s stability accounted for almost 90% of the difference in layoff notices over the year.

Jobless claims edged up last week and the level is a touch elevated. That is odd given the lack of job cuts and the high demand for workers. Still, when adjusted for the size of the labor force, the level remains quite low. Firms are simply not cutting their workforces.

MARKETS AND FED POLICY IMPLICATIONS: The Fed members have been puzzling over whether the labor market is at or near full employment. The extent of slack, if there is any, is critical because more rapidly rising wages would put pressure on prices, forcing the FOMC to hike interest rate faster and greater than the markets expect. Well, the data seem to indicate the labor market is really tight. Layoff notices are near record lows, as are unemployment claims. The need to hold on to their workers is also helping the job growth numbers. Keep in mind, monthly employment changes are the difference between payroll increases and decreases and those can occur for any reason, including hiring, firing, business births or business deaths. When the job cut numbers are low, it allows for the job increases to be higher as it reduces the number of people looking for jobs as well as job openings. Think of what the job openings would be if firms were more aggressive in their firings. I would be surprised if tomorrow’s report shows anything near what ADP says were the job gains, but it should be a good report nonetheless. But I will be watching the unemployment rate and hourly wage data. If the rate declines and wages rise faster, which is likely, the Fed is going to start worrying about wage inflation. Jerome Powell may not be taking over with the same level problems that either Ben Bernanke of Janet Yellen faced when they assumed the Fed’s reins, but he still could be in for a very difficult time. The markets are not expecting more than a couple of rate hikes this year but more and more economists, including myself, think that there will be at least three and possibly even four. Investors have been looking past interest rate moves. They didn’t expect the three we got last year but passed them off as irrelevant. If we get another three or four this year, will they continue to be so bullish?

December Supply Managers Manufacturing Survey, Help Wanted OnLine and November Construction

KEY DATA: ISM (Manufacturing): +1.5 points; Orders: +5.4 points/ HWOL: +229,700/ Construction: +0.8%

IN A NUTSHELL: “The economy carried a lot of momentum into 2018 and that growth will be boosted by the tax cuts.”

WHAT IT MEANS: It is shaping up to be a very good year. The data for the December are starting to come in and they look really good. The Institute for Supply Management’s manufacturing index rose nicely, driven by a strong gain in new orders. Both export and import demand were up solidly. With orders rising, production expanded at an accelerated pace. The only negative, if it really is one, was a deceleration in the pace of job gains. Still, manufacturing firms are hiring at a solid pace and the growing order books should lead to even better payroll increases going forward.

The Conference Board’s measure of online job ads rose in December. There had been a nearly two year decline in want ads, but that started turning around in the spring. It looks like the pattern is clearly up again. Geographically, the increases were in almost every state and all metro areas reported. Eight of the ten occupations also showed increases in online advertisements. With unemployment falling and advertising rising, the pressure on firms to find qualified workers is high and worsening.

Construction activity continues to soar as well. The value of new construction jumped in November with private activity leading the way. Both residential and nonresidential building rose solidly. The increase in office and commercial building points to growing confidence in the staying power of the expansion.

MARKETS AND FED POLICY IMPLICATIONS: The economy is in really good shape. It is hard to find a sector that is weak. Even vehicle sales, which were expected to slow in December, appear to have come in at a very strong pace, possibly the second highest of the year. That implies fourth quarter growth should be in the 3% range and could exceed it. And once the tax cuts start hitting worker paychecks, we could see some acceleration in demand. Meanwhile, companies will have to figure out what to do with their large increases in profits that were created by the tax reductions. How they spend that largesse will determine the extent to which the economy grows this year. Will they be put to good use by funding capital spending or will they be squandered on stock buybacks and dividend increases, which increase stock prices but not productive capacity or efficiency? How much goes to workers versus executives or owners of capital will also determine the extent to which consumer demand rises. However that works out, growth should be in the 3% range this year and maybe greater. But as I like to say, no good deed goes unpunished. That pace of growth would drive the unemployment rate down below 4% and by year’s end, the 50-year low of 3.4% could be in sight. If that doesn’t raise wages, nothing will. And if that happens, the Fed will be raising rates more than expected. But for now, let’s enjoy the strong economic numbers, which should help keep investors quite happy.

Revised 3rd Quarter GDP, December Philadelphia Fed Manufacturing Index, November Leading Indicators, October Home Prices and Weekly Jobless Claims

KEY DATA: GDP: 3.2% (down 0.1 percentage point)/ Phila. Fed: +3.5 points/ LEI: +0.4%/ Home Prices (Over-Year): +6.6%/ Claims: +20,000

IN A NUTSHELL: “There seems to be no end to the strong data.”

WHAT IT MEANS: Another day of numbers, another round of strong data. The second revision to third quarter GDP showed basically the same growth rate that had been seen in the previous two iterations. That is really a surprise. There is normally a great set of changes as a broader sample of data come in. The changes were relatively modest, though there was a somewhat larger downward change to the gross domestic income measure. That seems to indicate that income growth is not quite as solid as the goods and services measure. Regardless, this was the second consecutive above-3% growth pace and it is consistent with the other data that are showing the economy is accelerating.

Will this strong growth continue? Even without the tax bill, there was every reason to think growth could hold up, at least for a while. The Philadelphia Fed’s early December reading of Mid-Atlantic manufacturing improved quite solidly. Importantly, confidence rose, most likely driven by a pick up in new orders. This area doesn’t have a lot of manufacturing, but the index does give us some insight into national trends and it is fair to say the sector is accelerating.

A second sign of strong future growth comes from the Conference Board’s Leading Economic Index, which rose again in November. The solid increase came on top of a huge, hurricane recovery increase posted in October. It is telling us that growth could accelerate over the next six months.

And then there is housing. The Federal Housing Finance Agency’s Home Price Index popped in October, mirroring the other home prices measures we have seen. The beleaguered Middle Atlantic region has finally joined the party, but the West Coast is where prices are simply soaring out of sight. In that area, we are probably in bubble mode.

Finally, there was a surge in unemployment claims last week. But that was on top of one of the lowest readings we have seen, so there is nothing to made of the jump. The labor market is tight.

MARKETS AND FED POLICY IMPLICATIONS: The year is ending on a high note. Growth is strong almost across the board. The impacts of the tax bill will not likely be seen before mid-year 2018 as the lower taxes show up in weekly paychecks, not all at once. Yes, some companies are giving out bonuses, but those only temporarily increase spending power. They look big, but for companies making billions, it is not a lot. Unless the bonuses are more widespread, they are not likely to do much for personal income. But raising the minimum wage does add to costs and income growth on a continuing basis. We need a lot more companies announcing that they are raising their minimum wage before we can conclude that spending will rise more solidly than it has been. Forecasts of 2018 growth are coming in and they range from about 2.5% to 3.5%. Oddly, I am pretty much in the middle, at 2.9%. I don’t usually wind up at consensus but that is where I am. In other words, next year is shaping up to be a really good one and it may even exceed the 2015 growth rate of 2.9%.