The Monday Morning Quarterback /A quick analysis of important economic data released over the last week
Elliott D. Pollack & Co.
When reviewing economic data the hope is that the information will meet expectations and initially make sense as reported. In many cases this continues to be the case. The next level of review is to examine the economic data that initially looks awry, but has some explanation as to why it is different than expectations.
Last quarter’s real GDP estimate of 0.1% falls into this category. While weak on the surface, the data was actually expected to fall sharply as a result of the unusually disruptive winter months. The Blue Chip Consensus Forecast is now calling for second quarter growth of 3.4%. This seems high but is within reason given the activity adjustments that occurred in quarter one. The forecast for the year is for a moderate 2.4% for the calendar year and 3.0% growth next year.
You may recall that the unemployment rate data is experiencing something similar. The in-and out-flow of people in the workforce is masking the underlying data to a mild extent. The good news is that in these cases one should look at the longer term trends and the trend is a declining unemployment rate. Looking at a single month is not as reliable.
At this point, continue to hope for the best, especially as it relates to Arizona, but plan for the moderate.
Arizona Snapshot
The state’s unemployment rate dropped below 7.0% for the first time since August of 2008, down from 7.3% in March to 6.9% in April. However, the decline in the unemployment rate is due to changes in the total workforce and the number of unemployed workers counted.
In April, the state gained 44,100 jobs compared to a year ago. This is a 1.7% growth rate. Greater Phoenix gained 39,100 jobs over the year ending April for a 2.2% growth rate. Greater Tucson grew by 2,400 jobs or a 0.7% gain.
The largest numerical gains were in Education and Health services, Trade, Transportation and Utilities, Financial Activities, Leisure and Hospitality, and Professional and Business Services.
For the first 4 months of the year, Arizona is 12th out of 50 states in terms of percentage growth in jobs (see chart below). Greater Phoenix is 11th out of 27 major employment markets in the U. S. for the same period.
U.S. Snapshot
Initial claims for unemployment continued to show good results. This is the second week in a row that initial claims were down by 24,000. This is 16.3% below a year ago.
Consumer prices were up 0.3% for the month and now stand a modest 2.0% above a year ago. The core rate of inflation (all items less food and energy) was up 1.8% from a year ago. Inflation won’t be a problem until the economy heats up. Mild growth is still in the forecast for this year though.
Industrial production in April declined 0.6% following a gain of 0.9% gain in March. It now stands 3.5% above a year ago.
Capacity utilization declined 0.9% in April and now is up 1.0% from a year ago.
Retail sales remained flat after two strong months. In April, retail sales increased by 0.1%, following a 1.5% in March and a 0.9% increase in February. Total retail sales now stand 4.0% above a year ago.
Housing starts picked up more than expected in April with a 13.2% monthly increase. However, the surge was all multifamily which increased by 39.6% while the single family component only increased by 0.8% in April. Housing starts now stand 26.4% above a year ago.
