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Pollack: Economic weakness a concern given jobs report
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The Source for Information and Analysis on the Arizona Economy and Real Estate
EDP LogoELLIOTT D. POLLACK

& Company

FOR IMMEDIATE RELEASE
June 6th 2016
 
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
The jobs report was a complete dud.  A 38,000 increase in jobs compared to an expectation of 155,000 jobs.  Even accounting for the 35,000 who are involved in the Verizon strike, the number is still really low.  On the face of it, it is the weakest performance since September 2010.  In addition, the last two months were revised significantly downward meaning that employers added 59,000 fewer jobs in March and April than first reported.
But wait, there’s more.  While the unemployment rate showed a decline to 4.7%, the decline reflected a contraction in the participation rate rather than more people getting jobs.  The FED believes that it takes about 100,000 new jobs per month to absorb those entering the labor market.  Thus, it’s not a case of the strength of the jobs market bringing back people who have been on the sidelines. And while there is a large margin of error in the jobs survey, when the economy is going well, the survey tends to underestimate, not overestimate.  So, all we can do is wait until next month to see if this is no more than an aberration or the start of a new trend.  Given the slow first quarter and the uncertain speed of the second quarter, this bears watching.
Is a recession on the horizon?  Probably not at this time.  In fact, the rest of the economic news this week was relatively good.  But, if the weakness continues, it will certainly make the economy more susceptible to shocks down the road.  Stay tuned to next month’s report.
U.S. Snapshot:
  • If you skipped the paragraph above, please go back and read it for a rundown on the jobs and unemployment reports for this month.
  • Personal income rose 0.4% for the month.  This was in line with expectations. Personal income now stands 4.4% above a year ago.  Disposable personal income was up 0.5% for the month in April and is also up 4.4% over a year ago.  Personal consumption expenditures were up 1.0% for the month and 4.1% over a year ago. As a result of spending increasing at a more rapid rate than income last month, the personal savings rate fell from 5.9% to 5.4%.  This compares to 5.1% a year ago.
  • The Conference Board’s consumer confidence index fell to 92.6 in May from 94.7 in April and 94.6 a year ago.
  • Manufacturers’ new orders were up in April by 1.9%.  And while orders are still down 1.8% from a year ago, the recent data is positive.  Inventories were down 0.1% for the month and stand 3.0% below last year.  This is also a positive as it appears that inventories are under control.  Durable goods orders were up 3.4% for the month and stand 2.0% above a year ago while durable goods orders excluding aircraft were down 0.6% for the month and 4.4% for the year.
  • The ISM manufacturing index increased to 51.3 in May compared to 50.8 in April. Any reading above 50 indicates that the manufacturing sector is expanding.  So, while the reading is weak, it still is a positive.
  • The ISM non-manufacturing index stood at 52.9 in May.  This is down from 55.7 last month and 55.9 a year ago.  Thus, the non-manufacturing sector is expanding, but, not by much.
  • While total construction spending was down 1.8% in April, it stands 4.5% over a year ago.
  • The S&P/Case-Shiller home price index increased 0.9% in March when compared to February and stands 5.4% over a year ago for the 20 city composite.
Arizona Snapshot:
  • Housing activity in Greater Phoenix continues to be positive.  According to the Information Market, total sales volume in May was up 2.5% for the month and 9.2% over a year ago. Median prices were up 3.0% and 7.7% respectively.
  • According to Information Market, Maricopa county new build sales volume was up 38.7% from a year ago and 8.1% over April.
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