The Monday Morning Quarterback /A quick analysis of important economic data released over the past week
Elliott D. Pollack & Co.
Despite the employment report coming in below expectations, last week’s economic data continued to show that the economy is expanding. This is the way it should be at this point in the cycle. The only disappointment is the rate of growth and, as we have discussed over the past several years, this is likely to be the way of things in this entire cycle. Only a significant recovery in housing and construction in general, something that is not likely in the near term, could change that. Even then, demographics (in the form of fewer people entering their peak spending years) and more modest growth in the labor force don’t bode well for a recovery to more normal rates of growth in this cycle. But, at least the economy is growing and the rate of growth should actually pick up over the next few quarters.
Arizona Snapshot
Arizona weekly unemployment claims continued to improve and are down 34.8% from a year ago.
Data from the Cromford Report and the Information Market clearly show weakness in the new and resale housing market over the past year. For example, active listings were up 29.6% from a year ago as of August. Single family resales were down 10.4% from a year ago. Average days on market were 88 days or 46.7% over the 60 days in August 2013. While prices are up in the upper single digit range for housing compared to a year ago, prices have clearly flattened out over the past few months. New build sales volume is down 3.6% from a year ago.
The good news is that foreclosure activity continues to decline. Residential foreclosure notices are down 30.4% form a year ago and the number of units that actually foreclosed was down 44.0% in August compared to a year ago. Distressed residential inventory was down 35.0% compared to a year ago.
U.S. Snapshot
The employment situation was notably disappointing in August. As reported, payroll employment rose by only 142,000 after an increase of 212,000 in July and 267,000 in June. Market expectations for August were 230,000.
The unemployment rate eased back to 6.1% in August from 6.2% in July. This reflects a drop in joblessness among teenagers as well as a decline in the labor force participation rate.
The underemployment rate, which includes part-time workers who would prefer a full-time position and people who want to work but have given up looking, dropped to 12%. This is the lowest since October 2008.
Productivity (output per worker hour in the nonfarm sector) grew by 2.3% in the second quarter. This largely reflects a rebound from the bad weather related decline of 4.5% in the first quarter of 2014.
Unit labor costs, an indication of labor cost pressures, declined by 0.1% last quarter and now stand only 1.7% above year earlier levels.
Factory orders surged 10.5% in July. This is skewed by Boeing orders at the Farnborough Airshow. Excluding transportation equipment, which includes aircraft and vehicles, factory orders actually slipped 0.7% in for the month. Regardless, it was a good month.
ISM’s manufacturing index rose to 59. This is up from 57.1 last month. Any reading of 50 or above indicates expansion in the manufacturing sector. This is the highest reading since March, 2011.
ISM’s non-manufacturing index rose to 59.6 in August, up from 58.7 in July. This is the highest reading since December, 2004.
Sales of autos and light trucks rose to 17.4 million in August. This is a gain of 9.4% over a year ago and 6.1% over a month ago.
Construction spending in July was up 8.2% from a year ago and 1.8% over June.
