ELLIOTT D. POLLACK
& Company
FOR IMMEDIATE RELEASE
March 14th, 2016
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
The good news this week belongs to Arizona. Employment growth rates have clearly improved. As of January, the state is up 3% over a year ago. But, more impressively, Greater Phoenix is up 3.6% over a year ago. And even Tucson, while lagging, is showing improvement at a 2.2% gain. While still below the historic norm, it is the best set of numbers in the cycle and shows acceleration in economic activity in the state and particularly in the Greater Phoenix area.
Since so much of the economic activity in the non-metro areas of the state is dependent on what goes on in Greater Phoenix and to a lesser degree Greater Tucson, this is important to the rest of the state as well. Unemployment rates, while still high for this point in a cycle, continue to decline.
Construction, the missing link in this cycle, is beginning to do well despite labor shortages in that industry. If the trend continues, this bodes well for 2016.
U.S. Snapshot:
- The U.S. Blue Chip consensus forecast of real (inflation adjusted) GDP growth stayed steady at 2.1% over the past month after falling sharply in the early February survey. The consensus still forecasts a 2.4% increase in 2017. This follows a pattern that has become all too familiar in this forecast. It’s a “wait until next year” mentality for better growth. Unfortunately, we have been disappointed when each year has arrived.
- Households ended 2015 with their home equity at the highest level in a decade. Household net worth continues to reach record highs as the housing crisis fades into the rear view mirror. Household net worth as of the 4th quarter of 2015 was up 3.1% over a year ago.
- Data revisions in non-revolving credit (vehicle financing and student loans) changed the monthly pattern such that January was down. But, January still showed a 5.3% gain over a year ago. Revolving credit (credit cards) was up 6.9% from a year ago in January and drew at a 5.4% annual rate as consumers continue to spend more freely with their credit cards.
- According to CoreLogic, the number of homeowners with more than 20% equity is rising as a result of a tight supply and continued population growth. Yet, as of the 4th quarter of 2015, there were still 8.5% of all homes with a mortgage that had negative equity (down from 10.7% a year earlier) and another 2.3% that had less than 5% equity (down from 2.8% a year earlier). Of the homes with equity, approximately 18.9% have less than 20% equity. This is down from 20% a year earlier.
Arizona Snapshot:
- As of January, Arizona had 78,100 more nonfarm jobs than a year earlier. This is a 3.0% gain. In absolute terms, the largest gains were in educational and health services, professional and business services, trade, transportation and utilities and financial activities. In percentage terms, the leaders were information, financial activities and construction.
- Greater Phoenix employment was up 3.6% (67,100 jobs) from a year ago. This is a strong number relative to this cycle. Greater Tucson was up 2.2% (8,100 jobs). This indicates a general acceleration in the employment picture in the state.
- The statewide unemployment rate in January was 5.6% compared to 5.9% in December and 6.4% a year ago. The U.S. unemployment rate is 4.9%, down from 5.7% a year ago. The unemployment rate in Greater Phoenix declined to 4.6% and Tucson’s was 4.9%. While this is still high for this point in the cycle, it still shows considerable improvement.
- According to CoreLogic, the percent of mortgaged homes with negative equity in Arizona as of the 4th quarter of 2015 was 14.0%, down from 18.7% a year earlier. The percent with near negative equity (5% of less) declined to 3.0% from 3.7% a year earlier. Yet, 22.8% of homes in the state with mortgages were still under-equitied (homeowners that have less than 20% equity in their home) compared to 22.9% a year ago.
