The Monday Morning Quarterback: A quick analysis of important economic data released over the past week
Arizona Snapshot
Arizona weekly unemployment claims were still way down from a year ago, but, by a lower percentage than any time in the last year. Sky Harbor enplanements and deplanements were both up. Foreclosure starts were back to normal (pre-bubble) levels. Auctioned foreclosures were at the lowest since 2007. Auctioned foreclosures to lenders were at the lowest since 2006. Median prices were still going up.
U.S. Snapshot
U.S. employment increased modestly, but still moving in the right direction. Initial claims for unemployment insurance were moving down. As expected, second quarter GDP was up at a very modest rate. Manufacturing was improving. Consumer confidence was flat for July vs. June but way up vs. a year ago. Personal income, disposable personal income and personal consumption expenditures were all up, but, the savings rate was down. Home prices continue to rise. Rental vacancy rates were declining and construction spending continues to rise. Not great, but certainly not a bad picture at all. And the outlook for continued growth remains positive.
Arizona
Arizona weekly unemployment insurance claims were down 36.2% from a year ago. Up until recently, the improvement has been in the 40% range. So, while unemployment insurance claims were improving vs. a year ago, the rate of improvement was slowing.
More people were landing in and flying out of Sky Harbor Airport today than did a year ago. Enplanements were up 2.0% while deplanements were up 1.7%.
The best news this week comes courtesy of Fletcher Wilcox. His latest data shows that total foreclosure starts were back to normal (i.e., at pre-bubble levels). The data for June, 2013 was 84.0% lower than it was for June, 2009 and about the same as the total number of foreclosures in June, 2003. Auctioned foreclosures were down 85.4% from June, 2009. Auctioned foreclosures to lenders were down 93.4% for the four-year period. The improvement was startling and was clear evidence that the worst is way behind us. We will spend the next year mopping up what remains of the problem.
As we have been saying for quite some time now, the housing market now has a more interesting problem. That is to find the means to expand building capacity in order to meet demand. That means not only more improved land, but more skilled labor to build 20,000-25,000 homes in Greater Phoenix by 2015. Don’t forget that when demand dropped almost 90% between 2005 and 2011, much of the home building infrastructure simply went away. To rebuild it quickly is the number one problem facing the industry at this time. The result will likely be higher prices for those things that go into building a house and, thus, higher housing prices. Be sure to read Catherine Reagor and Ronald Hansen’s article on the subject in the Sunday (Aug. 4) Arizona Republic or on AZcentral.com for an excellent discussion of the issues.
National
Nonfarm payroll employment continues to grow albeit at a modest rate. Jobs, full time and part time combined, grew by 162,000 in July and now stand 1.7% above July, 2012. The fastest growing sectors include retail, food and drinking places, financial activities and wholesale trade. The unemployment rate inched down to 7.4% as many continue to be out of the labor force. But, this was an improvement from 8.3% a year ago. Initial claims for unemployment insurance at the national level was showing improvement. It was 10.9% below year earlier levels.
As expected, second quarter real GDP was up at an annual rate of only 1.7% and now stands a very modest 1.4% above year earlier levels. In addition, as of June, personal income was up 3.1% from a year ago. Disposable personal income was up at a slower 1.9%. However, consumers did not slow their spending as personal consumption expenditures were up 3.3% over a year ago. This was the result of a decline in the personal savings rate to 4.4% from 5.6% a year ago. This is a reflection of higher consumer confidence over the year. While July confidence, according to the Conference Board, was actually slightly down from June, the 80.3 reported is much better than the 65.4 reported a year ago.
Manufacturing results were also better. The ISM manufacturing index for July was 55.4 compared to 50.9 last month and 50.5 a year ago. Any result in excess of 50 shows that manufacturing was expanding nationally. In that regard, new orders for manufactured goods were up 6.8% in the June, 2013 vs. June, 2012 period. Construction spending was also up but at a more modest 3.3% rate.
According to the S & P/Case-Shiller home price index, home prices (20-city index) were up 12.2% over the last year and 2.4% over the last month. In Greater Phoenix, the index says that as of May, home prices were up 20.6% from a year ago and 1.9% over April. The National Association of Realtors pending sales index was slightly down in June, but, was up over 11% from year earlier levels. Overall, the national picture of slow but continued growth remains in place.
