The Monday Morning Quarterback /A quick analysis of important economic data released over the past week
It was a good week for the economy. Employment was up as was productivity, personal income, household net worth and non-revolving credit. The manufacturing index was up and total auto and light truck sales did well.
For Arizona, weekly unemployment claims continued to decline and housing prices responded to supply and demand by continuing to be about flat. However, the most interesting piece of data was regarding the Greater Phoenix homeownership rate for 2013.
Overall, the economy continues to show improvement at a slow rate. The expansion should continue for quite some time.
Arizona Snapshot
The most interesting piece of data showed the homeownership rate in the Greater Phoenix area was reported as 62.1% for 2013. This is down from 72.4% in the peak year of 2006. While a significant percentage of those who went from owning to renting might not come back to the home buying market at any time soon, the number still suggests a large pent up demand. While Dodd-Frank, the change in the FHA loan limit and the 7-year ineligibility rule after a foreclosure for Freddy and Fanny are certainly real negatives, they eventually will be overcome by many buyers.
Weekly claims for unemployment insurance continued to decline modestly, but now stand 28.5% below a year ago.
Single-family listings in Greater Phoenix are up 40.3% over a year ago as of February. Sales are down 19.0% for the same period. Thus, it should be no surprise that median prices of homes sold has been about flat over the past 7 months.
U.S. Snapshot
Nonfarm employment increased by a seasonally adjusted 175,000 jobs in February. In addition, both December and January employment data were revised upward by 9,000 and 16,000 respectively. This is good news and exceeded expectations.
The unemployment rate ticked up to 6.7% from 6.6% in January as the labor force grew in excess of jobs created. This is to be expected as some discouraged workers can be expected to rejoin the labor force as employment opportunities improve.
As of February, the U.S. economy has regained 92% of the jobs lost in the last recession. This is a terribly slow climb.
Productivity in the fourth quarter rose by a revised 1.8% after a 3.4% boost the prior quarter. Unit labor costs declined an annualized 0.1% following a decrease of 2.1% in the third quarter. Both of these were positive. Yet, they were less than expectations.
The consumer sector was mostly positive in January in terms of income. Personal income grew by 0.3% in the quarter and now stands 4.1% over the prior year’s level. Disposable personal income was up 4.0% over a year ago. Yet, the change in January’s personal income number was affected by several special factors related to such items as the Affordable Care Act (ACA) that affected government social benefit payments. Excluding the special factors, personal income was still up by 0.2% over December.
The net worth of households and nonprofit organizations rose 13.8% last year to the highest level ever (see chart below).
Consumer debt restructuring continued in January as consumers eased off their credit cards after the holidays. Overall, consumer credit was up 0.4% in January but the entire increase was in non-revolving credit used for such items as auto and student loans. Credit card usage was flat.
The ISM’s manufacturing index rose to 53.2 in February. That is up from 51.3 in January. Any reading above 50 indicates that the manufacturing sector is expanding. The same is true for the non-manufacturing sector. So even though that index was 51.6 in February compared to 54.0 in January, it still indicates that the non-manufacturing sector is expanding.
Sales of autos and light trucks continued steady at 15.3 million units.
Construction spending was up 0.1% in January compared to December. January stood 9.3% above year earlier levels.
The number of homeowners with mortgages that were underwater in the 4th quarter of 2013 was 13.3%. While this is slightly higher than the 13.0% reported in the 3rd quarter, it was down from 21.7% a year ago.
