The Monday Morning Quarterback: A quick analysis of important economic data released over the past week
Fiscal Cliff Update
At the last minute, Congress and the president agreed on a package that dealt with tax issues and kicked the can down the road on spending issues surrounding the fiscal cliff. What should be at forefront of everyone’s mind are the very large deficits that the country will, in the absence of some real statesmanship, continue to run until the rest of the world gets nervous and forces up interest rates.
The administration has stated that about $4 trillion in tax increase and reductions in spending are needed over the next 10 years to get the deficit down to a manageable level. The real number is closer to $6 trillion. The tax package agreed upon last week gets us about 10-15% of the way there. Thus, the bulk of the problem lies ahead. Without dealing with social security and Medicare, there is no hope of a solution. The issue is unlikely to be meaningfully resolved at any time in the near future. In some ways, this is like the housing bubble. You might know it’s there, but no one can tell when it will burst or exactly what the consequences will be.
REVIEW OF THE LATEST DATA ON THE LOCAL AND NATIONAL ECONOMY.
Arizona Snapshot:
There continues to be improvement in statewide unemployment claims. However, lodging performance in the state and in Greater Phoenix is not encouraging.
U.S. Snapshot:
More slow growth. Employment was up modestly and manufacturing again appears to be growing but barely. The service sector continues upward. Motor vehicle sales were strong. Construction also looks better.
Arizona
Total claimants receiving unemployment benefits in the state dropped to 40,000. This is the lowest since the first half of 2008 and is down from the peak of about 118,000 in the summer of 2009. Initial claims are also down to early 2008 levels and only about one-half of what they were at the peak in 2009. Thus, the state continues to improve. The total level of claimants is about twice what is normal at this point. At least things in this area appear to be moving in the right direction.
On the other hand, both statewide and Greater Phoenix lodging performance remains disappointing. Occupancy in November was 54.0% for the state. This is down from 54.9% a year ago. Demand was down 1.8% over a year ago. For Greater Phoenix, occupancy in November was down to 57.3% vs. 59.2% a year ago. Demand was down 2.6%. Thus, this sector remains weak.
National
National nonfarm employment grew by 155,000 jobs in December. This is about average for the past year and shows no acceleration in the economy. It is still positive, however. The unemployment rate remains at 7.8% for the U.S. as a whole. So while initial claims for unemployment insurance in Arizona are down substantially from a year ago, in the U.S., they are down only a modest 2.9%.
According to the Institute for Supply Management, the manufacturing sector grew in December. While the index indicated that growth was very modest, it was good news after the November report that indicated a modest contraction in manufacturing. In that regard, U.S. manufacturers’ new orders for November were up a modest 0.8% from November 2011. The ISM index for non-manufacturing for December indicated continued growth.
Sales of light motor vehicles and light trucks in November surged at a monthly rate of 8.8% and now stand 14.6% above year earlier levels. And while U.S. construction spending in November was slightly down from October, November 2012 was 7.7% ahead of November, 2011 and was up 9.2% for the first 11 months of the year compared to the similar 2011 period. All the gains were in private construction.
