The Monday Morning Quarterback: A quick analysis of important economic data released over the last week
Elliott D. Pollack & Co.
Arizona Snapshot:
The unemployment rate in the state continues to inch down and the number of jobs continues to increase, albeit at a modest rate. Construction leads the way in terms of new jobs created, followed by leisure and hospitality, professional and business services, and financial activities. Greater Phoenix leads the way in terms of job growth while Greater Tucson shows only very modest growth. While housing permits in Greater Phoenix are up at a double-digit rate for the first five months of the year, May permits were down. The problem appears to be on the supply side. There are few spec new homes and the number of active subdivisions is very low by historic standards. Thus, choice is limited.
U.S. Snapshot
Initial claims for unemployment insurance went in the wrong direction for the week ending June 15 after a good showing the previous week. Claims are still down only modestly from a year ago. Leading indicators were slightly up. Inflation, as measured by the CPI, remains under control. Money supply, be it M1 or M2, grew at rates that are higher than what has been historically consistent with the rate of real GDP and price growth. This has been the case for most of this expansion, as the velocity of money remains weak. The NAHB housing market index continues to show builder confidence growth, and existing homes sales and prices continue to expand as do single family permits.
Arizona
The unemployment rate in Arizona decreased one-tenth of a percent to 7.8% in May. Nationally, the unemployment rate was 7.6%. On a year-to-date basis (first five months of 2013 vs. the similar 2012 period), total nonfarm employment was up 2.0% for the state as a whole, 2.4% in Greater Phoenix, and a modest 0.9% in Greater Tucson. While any increases should be looked at positively in the current recovery, realistically, these are mediocre numbers. At least the recovery appears to be broad-based. Total weekly unemployment claims showed good improvement for the week ending 6/15. They now stand 43.0% below a year ago.
According to R. L. Brown, new home permits for Greater Phoenix were down in May from 1332 a year ago to 1237. This 7.1% decrease was unexpected and disappointing. It appears to reflect a supply problem rather than a demand problem, according to market watchers. The supply problem, according to some, is that consumers are now being offered few choices. The number of move-in ready single-family homes is minimal, and the number of subdivisions (or “stores” in homebuilder vernacular) continues to be very limited by any historic figure despite continued attempts by homebuilders to bring on new stores. Many existing “stores” are near build-out. So, the net change in “stores” has been limited. Still, permit activity will continue to be important to watch. R. L. also reported that resales were well up over a year ago (9.2%) and prices of existing homes continued to increase, up 25% over a year ago. New home prices in May, while well up over a year ago, were down 1.7% from April. This is another issue that needs to be monitored.
New home prices in Greater Tucson were up about 24% year-over-year in May. The same general trend in permits that occurred in Greater Phoenix is occurring in Greater Tucson. Permits were down 15% versus year earlier levels. Median resale prices were up about 11% compared to May 2012.
National
Leading indicators were up only slightly in May. The index now stands at 95.2 (2004=100) compared to 95.1 in April and 95.8 from a year ago. It follows a 0.8% gain in April and a 0.3% decline in March. Initial claims for unemployment insurance rose for the week ending 6/15. Improvement in this indicator has been slow to materialize. At least there was good news on the price front. The consumer price index for all items was up at a modest 1.4% annual rate in May. Prices less food and energy (referred to as the base rate) were up 1.7%. On the other hand, money supply as measured by M1 and M2 increased at rates that are not historically consistent with the rate of real GDP and inflation growth the country has been experiencing The velocity of money continues to be very slow by historic standards. The rubber will hit the road when the country starts to experience more normal rates of growth, probably in 2015.
Housing continues to be a good news story nationally. The National Association of Home Builders housing market index continues to expand and now stands at 52 compared to 44 in May and 29 last June. This is consistent with the strong resale and new single-family market data that was reported in May. Sales of existing homes were up 12.9% over a year ago at 4.2% over April. Resale prices were up 15.4% nationally when compared to a year ago. Single-family permits were up 24.6% over a year ago and 1.3% over April.
