The Monday Morning Quarterback: A quick analysis of important economic data released over the last week
Arizona Snapshot
The Arizona unemployment rate increased. This was not good news especially in view of the fact that the labor force continues to decline as more potential workers become discouraged and drop out of the labor force. Arizona weekly unemployment insurance claims were about flat and have made little gain in the last few months.
Real estate continues to improve. Active listings in Great Phoenix remain about flat and at a low level while single family sales are up from a year ago. Days on market were down and prices were up, but, at a lesser rate than they have been. The Greater Phoenix office market experienced absorptions that exceeded the change in inventory while vacancy rates and rental rates remained relatively flat. As for the industrial market, CBRE data showed that the change in inventory exceeds net absorption, vacancy rates rose and rental rates were about flat. In retail, net absorptions exceeded the net change in inventory and vacancy rates were down.
U.S. Snapshot
Initial claims for unemployment insurance showed no improvement. The ISM non-manufacturing index was up and indicated that July was the 48th month of expansion in the service sector. Consumer credit was up in June. The bulk of the increase was in non-revolving credit-mainly for autos and student loans. Revolving credit (mostly credit card debt) declined from a year ago. Auto and light truck sales were flat in July compared to June, but were way up from a year ago. The National Association of Realtors data on metro area home prices show a significant gain in home prices nationally over the last year. This is good news are fewer homeowners are underwater and the increase in equity will make homeowners feel better and will allow more to have sufficient equity to move. Thus, it remains autos and housing that are fueling the recovery.
Arizona
The unemployment rate in Arizona and Greater Phoenix rose in June relative to May but was down from a year ago. In Arizona, the unemployment rate was 8.0% in June, up from 7.8% in May but down from 8.4% a year ago. In Greater Phoenix, it rose to 6.9% from 6.8% last month but was down from 7.3% a year ago. In Greater Tucson, it was 7.0% in May and June and 7.3% a year ago. The underlying data shows a less than sanguine situation. The number of unemployed and the rate declined over the last year NOT because of a big jump in employment according to DES data, but, because of a decline in the labor force. That means either the population is declining-an unlikely event given other data-or discouraged workers continue to drop out of the labor force. That means they stopped looking for work. No matter how you look at it, this reflects a weak national trend and the fact that the present growth rate is quite anemic for this point in the cycle. Hopefully that will pick up a little in the second half of the year and into 2014. In that regard, the number of weekly unemployment claims in the state has plateaued over the past few months. This is another sign that the State’s economy still has a way to go before it approaches something even close to normal.
Better news continues to flow out of the real estate sector. As for single family, according to the Cromford Report, active single-family listings in Greater Phoenix were still low at about 16,000. Single-family resales, though, are up over 10% from a year ago. Because of this, the average days on market dropped from 72 a year ago to 64 in July and median prices were up to $184,000. This was 26.9% from a year ago and over 55% over the low reached in the summer of 2011.
Commercial real estate in Greater Phoenix was slowly improving according to CBRE data. In the office market, 2013 will be the second year in a row when net absorption exceeds net new change in supply. This is good news after the five year run (2007-2011) when there was more new inventory added than absorbed. Vacancy rates are flat compared to a year ago, however, (at about 23.9%) and rental rates are flat as well. As for the industrial market, net change in inventory exceeded the absorption figures for the first half of 2013. Vacancy rates now stand at 11.9%. The good news is that absorption exceeded change in new supply in 2010, 2011 and 2012 and has allowed vacancy rates to decline from 13.9% two years ago. As for retail, absorption continues to exceed new supply as it did in 2012. This is great news after 5 years of change in inventory exceeding absorption.
State sales tax collections were still on the rise. June collections resulted in a 4.9% increase from May and a 10.2% increase from the same month a year ago. Year to date, the state had experienced a 7.1% increase in sales tax collections over the same period in 2012.
National
According to the Institute for Supply Management, the index for non-manufacturing rose in July to 56.0, up from 52.2 in June. Any reading over 50 suggests growth in the non-manufacturing sector. July will be the 48th consecutive month of expansion.
Initial claims for unemployment insurance have not made much progress lately and now stand about 9.5% below year earlier levels. This reflects the slow rate of growth in the economy.
Autos and housing remain the bright spots in the current national picture. Consumer credit increased in June. Most of the increase was in non-revolving credit used for autos and other fixed rate longer term loans such as student loans. Revolving credit actually has declined over the past year as consumers continue to pay down credit cards. This is also in line with the increased spending for light trucks and autos. While July sales were flat compared to June, they are more than 11% higher than year earlier levels. The National Association of Realtors report that median housing prices nationally were up 12.2% from a year ago in the second quarter. This continues to be good news as it reflects fewer homeowners under water, more equity in homes and, therefore, a positive wealth effect and an increased likelihood that more people will be able to sell their homes and move.
