While the arrival of June signifies the beginning of vacation season, the focus in the U.S. economy this week shifts to work. The Labor Department releases its May employment data on Friday. The consensus among economists is that the report should show decent job creation, after a better-than-expected showing for the April data.
The month of June means we're nearing the end of the second quarter and the first half of the year. Will 2014 begin to bring the economic heat? That remains to be seen, after a not-so-hot start. Instead of growing during the first quarter, the economy actually contracted at a 1 percent rate, as we learned last week.
Economic indicators to watch
Among the key reports due this week:
- The Institute for Supply Management reports on May manufacturing activity, Monday at 10 a.m. (All times Eastern.)
- The Commerce Department reports on April factory orders, Tuesday at 10 a.m.
- The Institute for Supply Management releases May data on the service sector, Wednesday at 10 a.m.
- The Federal Reserve's Beige Book economic roundup is released, Wednesday at 2 p.m.
- The Labor Department releases the May jobs report, Friday at 8:30 a.m.
Travel more, pay less this summer
When they ask, "Are we there yet?" you can say, "Almost – and the gas and the rest of it didn’t cost a lot of money!"
Mark Hamrick: From Bankrate.com, This is "Your Money This Week."
I'm Mark Hamrick in Washington.
Summer travel season is here. And Americans are hitting the roads again in numbers that haven't been seen in years. As the economy has improved, Americans have jumped in their cars a little more often, whether visiting family and friends, or have headed to vacation destinations.
We check in with the travel industry's main trade group and economist Dave Huether, hearing about trends in leisure and business travel.
And what about gas prices? GasBuddy's Tom Kloza gives us the lowdown on the outlook for filling up at the pump this summer. He says Americans love their cars but hate spending on gasoline, and that explains why so many are savvy shoppers when it comes to shopping for low prices at the pump.
All of that and more coming up on "Your Money This Week."
AAA forecast the number of Americans hitting the road over the Memorial Day weekend was the largest since the recession and the second highest number since the year 2000.
And summer and vacations, including long holiday weekends, provide opportunities for more travel, whether by planes, trains or automobiles.
To get an idea about vacation spending and other trends, we checked in with Dave Huether, senior vice president for research. He's an economist with U.S Travel, the main industry trade group.
To begin, I asked Dave about signs that Americans are, in fact, venturing out more.
David Huether: Yes, that's true. Travel is one of the few industries that have completely recovered from the recession. If we look at the most recent data through April of this year, we see that both output and, very importantly, employment are at an all-time high and that is being driven by two main components: One is domestic leisure travel, and the second is leisure travel as well, primarily, but it is international travel, which has been growing at a very robust pace.
Mark Hamrick: You know, I am just thinking as you are talking about that, that you can kind of set your own financial pace when you are engaging in domestic travel, and I know that having grown up as an essentially working-class kid in the Midwest, where it wasn't always pretty as we ventured out across the United States. But I am thinking about the fact that it is something where people, if they want to, they really can budget, and they can travel at the level of quality accommodations, etc., that they really choose and there really is a tremendous range of options out there.
David Huether: That's right and it is very interesting, because the vast bulk of leisure travel is done by car, as it was 10-15 years ago. At the same time, if you look at how much is done out-of-state versus done within state, you see it is split almost 50-50, so there is a lot of visiting friends and relatives that is leisure travel, and there is also the general vacation travel that is also a big component of it. Of course, the general vacation type of travel has a bigger bang for the buck than visiting friends and relatives, because people tend to stay a little bit longer, they are also spending money at the destinations with a little more frequency, they are spending money at hotels, etc., and so when you have general vacations, they tend to pack a bigger economic punch than visiting friends and relatives. But, visiting friends and relatives has been and continues to be one of the main reasons why people travel. They travel, to one degree, to stay connected with their friends and relatives.
Mark Hamrick: When we are talking about the dollar sign piece of this, Dave, I am wondering -- is there a large share of this travel dollar that is being spent also distributed among luxury travelers? I think about destinations around the country, whether it is close to home here in Washington, D.C., or elsewhere like a Phoenix, Arizona, or New York or Los Angeles, where there are some really expensive and, by extension, luxurious options available that are really frequented by a small segment of the public, but then again they are spending a lot of money, so it kind of represents significant part. Is there income inequality being represented significantly in the travel world?
David Huether: To some degree, in the sense that the traveler in the United States tends to have a higher income than the general U.S. population by about $10,000-$15,000, in terms of family income. And if you look at some of the places that are more expensive -- or, actually, have a larger travel foothold, i.e. the New Yorks, the Californias and the Floridas of the world -- yes, you will see growth there. The more interesting point is that a lot of it, because a lot of travel is done fairly close to your home proximity, a lot of travel is being generated -- or at least the pace -- is being generated by how good the local economy is. I will give you a great example. If you go to the smack dab middle of the country, the Texas/Oklahoma/Kansas region, where there has been a surge of activity due to oil, natural gas, etc., those areas -- in fact, I was out in Oklahoma last month, and I was looking at the recovery in the travel industry of Oklahoma compared to the southeast region in the U.S., country overall -- and Oklahoma actually outperformed both the southeast region of the United States and the whole country, and part of the reason was because the recession wasn't as deep there, and it has come back a little faster.
The general economic situation in a state and surrounding states also has an important impact on the travel industry, just because there is a large share of travel that takes place within the state. So if the state is economically healthy, then there will be healthy travel there, typically.
Mark Hamrick: How is business travel doing? I can remember 13 years ago or so there was kind of apocalyptic prediction making going on out there that said, "You know what? Business travel, because of 9/11 and the complication of airline travel, will never be where it was before." But I have a sense that a lot of that was sort of over the top in the sense of negative predictions, and there still is a lot of business travel going on.
David Huether: Business travel has been in recovery the past four years. We have seen business travel grow for the past four years in a row, which it hadn't done in the prior decade. There were a couple of years where there was growth, but it was in the immediate aftermath of 9/11, and then leading into the recession in 2008/2009. During those middle years, there was growth in business travel that was offset by some declines at the beginning and the end of the decade. For the past few years, we have seen business travel grow. It hasn't been growing as fast as leisure travel, and our forecast is that business travel is going to continue to grow, but it probably is not going to be growing as fast as leisure travel. It has been on a growth path the past few years.
Mark Hamrick: Well, Dave Huether, ideally it is always fun to travel, particularly for leisure, and it is fun to talk about the subject, and you do a great job of telling us what is going on out there with your particular, very good point of view and viewpoint. Thanks so much for taking time to speak with us.
David Huether: Yes, thank you very much and take care.
Mark Hamrick: Dave Huether, senior vice president with U.S. Travel. He spoke with us from his office in Washington.
For plenty of other money-saving tips on travel, check out Bankrate.com.
Now that the month of June is here, the summer travel season has begun in earnest.
As chief oil analyst with GasBuddy, Tom Kloza has a terrific perspective on how much we're paying at the gasoline pump.
I asked him what Americans will be seeing this summer as they venture out.
Tom Kloza: I think it is a little bit like Groundhog Day, actually, even though it is June. Because in the most part, for the most part, they are going to find the average price of gasoline is about where it was at the beginning of June in the last three years. Now the difference is, if you live in the Midwest, in the breadbasket, in the Great Plains, in the Rocky Mountains, you will see prices anywhere from 30 to 50 cents lower than you have seen in the last couple of years. If you live on the coasts, it is a little bit higher. But it should not be a high enough number in most cases to really intrude on any consumer behavior or travel, at least for the first part of the driving season.
Mark Hamrick: Well Tom, as one who has done as much driving as he has done in decades because of the graduation of a college student in our family, I noticed that as you drive across portions of the United States, it is obviously born out in the data that you have been gathering for some time. And then there is tremendous variation in gasoline prices that are out there. Here in the D.C. area, where I am speaking, fairly high gasoline prices, but you go into some of the southern states -- obviously taxes play into this this -- are comparatively low. Just generally speaking, why is it that we have such variation that drivers will come across as they are going out there and filling up?
Tom Kloza: Well taxes still play a big and important role. In D.C., you have high taxes, Chicago and New York, and in Virginia, for example, they lowered the tax last year, quite an extraordinary move. But the different thing now is that there is a lot of diversity for the cost of crude across the country. If you are a refiner running crude oil, and that is essentially going to determine the price of gasoline, and you happen to be in the upper tier of the Rockies or the Midwest, you are going to have access to crude oil that costs less than $85 a barrel. If you are on the coast, the Northeast, the West Coast, whatever, you may have to pay $100 to $110 a barrel. So there is a great diversity in crude oil prices, and with that diversity in crude oil prices comes a lot of diversity in gasoline prices. The wholesale price of gasoline in the Pacific Northwest is probably about 50 cents higher than the wholesale price of gasoline at the Gulf Coast. So you might call it the balkanization of gasoline, but I think it is actually a dividend that comes with some of these very cheap discounted crudes versus the rest of the world. I know people do not like to consider that we are beneficiaries, but we are a privileged continent in terms of being able to have access to the cheapest crude oil in the world and actually the cheapest natural gas, which keeps refining costs down substantially.
Mark Hamrick: In some ways it is a mixed blessing, right? Because we can consume more gasoline, and because we can, we do.
Tom Kloza: Yes, you know we can, and you will hear a lot of people talk about, oh, there is more driving this year than last year, and gasoline consumption is as high as it ever has been. And I think that is a little bit of poppycock. Because the average age of the motor -- the fleet, is about 11.4 years. And as these cars are being traded in, they are getting 15 to 16 miles per gallon and they are going up to 28 and 29. You know, the average of the new fleet is 25.3 right now. And the other thing that is working to really curtail gasoline consumption in this country is people drive a lot when they are between the ages of 35 and 54. And that demographic group is declining. And it is declining as it is moving into the older crowd that drives a lot less.
Mark Hamrick: I wanted to ask you also since you are involved with Gas Buddy and the app and the other ways that that information can be gleaned, do you find that consumers are taking advantage of this information? In other words, it is one thing to have access to the information, it is another to act upon it? How is that changing the decisions that the drivers are making as to where to fill up.
Tom Kloza: I think we are all absolutely astonished. And as someone who, admittedly, just buys on the basis of convenience, I am shocked when I see tens of millions of people who absolutely are treating the purchase of gasoline the way that someone might treat managing a fantasy baseball team. Everyone wants a deal, and it seems as though money saved on gasoline is something that is very, very special, almost like silver certificates.
So we have seen upwards of 40 million people download the app, we have got a very, very vocal group of zealots who are out there looking for the best price, and I think it comes down to the point of which we have noticed before, is: Everyone really wants a deal. And there is nothing quite like gasoline where you know that there is seven or eight different prices in sort of one's driving area, and to optimize that and get the cheapest prices, is really something that has got a great movement behind it.
Mark Hamrick: Tom Kloza, we always learn something when we talk to you, thank you so much for your time.
Tom Kloza: Take care.
Mark Hamrick: Tom Kloza, chief oil analyst with GasBuddy.
If you are traveling this summer, will you carry cash, or spend using plastic, or some combination?
Bankrate's Doug Whiteman looked into the question, whether a credit card an annual fee is right for you?
Doug Whiteman: More credit card companies are charging a yearly fee if you want to use their plastic. Are these annual-fee cards a bad deal?
The fees typically come with credit cards offering travel points or other rewards, and they tend to range from $39 to $175, though some top-tier travel rewards cards will charge much higher fees. Experts say if you travel for business and will use the perks that can come with these cards, then the fees can be worth it.
But rewards cards typically come with higher annual percentage rates than other credit cards, so if you don't pay off your balance each month and rack up interest charges in addition to the fees, then the cards can become expensive.
You also want to check the rewards program's terms and conditions, because you'll be making a mistake if the points expire before you're likely to use them, or if the airline miles are good only for a carrier that doesn't serve your area.
For more on whether an annual-fee credit card is right for you, visit Bankrate.com. I'm Doug Whiteman.
Mark Hamrick: This week in business history: Our latest entry is particularly cheesy, really.
On June 2, 1928 Kraft unveiled Velveeta, essentially a brick of processed cheese. Along with grilled cheese sandwiches, it has also found favor as a key ingredient in queso dip, or nachos, as well as with mac and cheese. A number of other products are marketed under the Velveeta brand name.
Happy birthday, Velveeta.
You've been listening to "Your Money This Week."
For more on this and other personal finance issues, visit Bankrate.com. Thanks to producer Lucas Wysocki.
I'm Mark Hamrick. From all of us here at Bankrate, here's hoping you have a great week.
Pace of jobs creation in May
Economists are generally upbeat on the trajectory of job creation. Over time, that should mean the unemployment rate declines and the job market tightens. On a monthly basis, however, there can be twists and turns.
Over the past year, through April, employers added an average of 190,000 jobs a month. Economists are betting that more than 200,000 jobs were added in May. Peter Morici, a professor at the University Of Maryland Smith School Of Business, is forecasting that 205,000 jobs were added to payrolls during the month.
"If we see something that is dramatically lower, then this only reconfirms the caution that we've been hearing from the Fed and others that there may be things going on that we do not know about," says Morici.
The 'I' words: Inflation and income
Central banks around the world, including the Federal Reserve, are concerned that inflation is "too low." Inflation has been held down by low wage growth, which has been restraining everything from consumer spending to home purchases.
Over the past year, the Labor Department says average hourly incomes have risen 1.9 percent. In a report issued Friday, the government said personal spending fell 0.1 percent in April, while incomes gained 0.3 percent.
"I am still disappointed with the relatively modest gains in wages and salaries," says Joel Naroff, president of Naroff Economic Advisors. "That may be great for earnings in the short run, but if domestic demand doesn’t rise faster, companies that depend upon U.S. purchases will have trouble sustaining their earnings." The strength of earnings is key for the stock market's recent rally to be sustained.
Economist Jeff Rosen with Briefing.com notes the curse of lackluster income gains. "Strong payroll growth would normally be associated with similar income gains. In April, however, both weekly hours and average hourly earnings were flat. That kept potential income growth in check."
What would change things? "A rebound in hours and wages would enhance income growth," Rosen says.
Then again, if inflation -- including wages -- were to stage a surprisingly sharp upward surge, it could catch financial markets, investors and central banks all off-guard.
This week in business history: Say cheese
On June 2, 1928, Kraft unveiled Velveeta, essentially a brick of processed cheese. But it melts better than other kinds of cheese. Along with grilled cheese sandwiches, it is often a key ingredient in nachos, as well as mac and cheese. A number of products are marketed under the Velveeta brand name.
Follow me on Twitter: @Hamrickisms