A quick analysis of important economic data released over the past week
Elliott D. Pollack & Co.
It was a good week for the economy. The employment news was good, not only because the October numbers were well above expectations, but, August employment was revised upward. In addition the unemployment rate declined to 5.0% and the underemployment rate broke the 10% barrier. In addition, consumer credit data strongly confirmed the strength of the consumer. And while manufacturers’ new orders were slightly down, the ISM manufacturing index still showed the manufacturing sector expanding, although modestly so.
The growth in employment, combined with wage growth above 2%, indicate the Fed will probably raise the interest rate in December. It would be the first rate increase in 9 ½ years.
Arizona Snapshot
According to the Cromford Report, the resale market in Greater Phoenix slowed in October. While the number of listings grew 5.0% from September, resales were down 12.6% from September and 0.8% from a year ago.
The spread between the median price and new home price of an existing home remained unusually large in October. The prices were $310,015 for new home and $210, 000 for an existing home. That puts the ratio at 147.6 compared to the pre-2009 average of about 120. The peak was in 2011 when, due to the large numbers of foreclosures and short sales, the ratio reached 200.
U.S. Snapshot
Total nonfarm payroll employment increased by 271,000 in October and the unemployment rate was 5.0%. The job gains occurred in health care, retail trade, food services and drinking places and construction sectors. In the past 12 months, employment growth had averaged 230,000. Employment growth over the past year was 2.0%. (See chart below).
Credit outstanding grew $28.9 billion in September. This is the largest monthly gain in the history of the series (back to 1941). Nonrevolving credit rose $22.2 billion thanks to more vehicle financing and student loans and now stands 8.0% above a year ago. Revolving credit (mainly credit card debt) grew by $6.7 billion and now stands 4.7% above a year ago. The September number reflects growth of 8.7% at an annual rate over August and is good sign for holiday spending.
Productivity grew at an annualized rate of 1.6% in the third quarter. It now stands 0.4% above a year ago.
Surprisingly, in September, imports declined and exports rose. As a result, the trade balance for goods declined by 2.9% compared to a year ago.
Manufacturers’ new orders declined 1.0% in September compared to August. This was the 11th declined in the 14 months. Orders now stand 6.9% below a year ago. With the factory sector in a downturn, unwanted inventories are at a heightened risk and manufacturers are trying to keep them in check. This held down 3rd quarter GDP growth and, unless orders pick up, may hold down 4th quarter GDP as well.
In October, vehicle sales were unchanged at 18.1 million units. This is a 12 year high.
Despite the slowdown in orders, the ISM’s manufacturing index indicated that the manufacturing sector expanded, though very slightly, for the 34th consecutive month. The ISM’s nonmanufacturing index increased to 59.1, up from 56.9 in September. This indicates that the nonmanufacturing sector is doing well.
