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Pollack: Possible economy acceleration awhile off
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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
January 9th, 2017
 
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
Welcome to 2017!
It should be quite an adventure economically.  The stagnation narrative seems to be over.  If President-elect Trump can get most of his economic tax, regulatory and infrastructure plans passed and can stay out of a trade war, growth should accelerate significantly, though likely  not until later this year or next.
The most interesting aspect of this to me is that while tax cuts have been tried successfully several times in the 20th century, it has almost always been in the early stages of a recovery/expansion.  Trump won’t even be inaugurated until the 91st month of this expansion.  The longest recovery/expansion in modern U.S. history was 120 months. So, it’s unlikely that whoever was elected would be able to get the economy through the next 4 years without at least a minor recession.  Time will tell.
In addition to stronger real GDP and job growth later this year and next, look for higher inflation and interest rates, higher after tax profits, repatriation of billions of dollars in corporate coffers that are now overseas, very tight labor markets, a reversal of the absolute declines in military spending that was a hallmark of the Obama administration and a tougher trade stance.  No matter what happens, the words “interesting” and “different” come to mind when considering the months and years to come.
For Greater Phoenix and Arizona, as the U.S. starts to accelerate, so will the local economy.  As employment markets get tighter, the propensity for people to move could increase.  If so, Greater Phoenix could do better than currently expected.  This is especially true for construction.  In fact, the shortage of construction labor could be a big story in late 2017 and 2018.
In recent economic news, employment was up and the unemployment rate continued to decline.  New orders for manufactured goods declined.  But, the ISM manufacturing index rose.  And construction spending also rose.  In Greater Phoenix, both the number of people boarding and deplaning rose.  And foreclosures were at levels that were below normal in 2002-2005.  That’s a good showing.
U.S. Snapshot:
  • Total nonfarm payroll employment increased by 156,000 in December.  The unemployment rate had little changed at 4.7%.  Job growth was led by the health care and social assistance sectors. The largest monthly gains were in health care (43,000), social assistance (20,000), manufacturing (17,000) and professional and business services (15,000).
  • Total job growth for 2016 was 2.2 million.  In 2015, jobs grew by 2.7 million.
  • New orders for manufactured goods in November declined by 0.3% from October and 2.4% from a year ago.  Durable goods orders declined in the month by 1.6% and 4.5% respectively.
  • The ISM manufacturing index rose to 54.7 in December from 53.2 in November.  Any reading above 50 indicates that manufacturing is growing.
  • The ISM non-manufacturing index was flat at 57.2 in December.  Again, any reading above 50 suggests growth.
  • The first indication for December in retail sales is very strong.  There were 18.3 million vehicles sold (annualized rate), a much higher than expected rate which is a new cyclical high.  In November, sales were 17.7 million units.
  • Construction spending rose 0.9% in November over October and was 4.1% aboveyear earlier levels.
Arizona Snapshot:
  • Compared to a year ago, both enplanements and deplanements were up in November.  Overall, enplanements increased by 0.3% and deplanements increased by 0.7%.
  • Active listings of homes in Greater Phoenix were 24,270 in December. This is about the same level as a year earlier.
  • In December, foreclosures were lower than what was normal before the housing bubble (see chart below).
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Rose Law Group Reporter, which provides Dealmaker’s content and service, is contracted by Rose Law Group. Rose Law Group is a full service real estate and business Law Firm practicing in the areas of land use/entitlements, real estate transactions, real estate due diligence/project management, special districts, tax law, water law, business litigation, corporate formation, intellectual property, asset protection, data breach/privacy law, ADA compliance, estate planning, family law, cyber-law, online reputation and defamation, lobbying, energy and renewable energy, tax credits/financing, employment law, Native American law, equine law, DUIs, and medical marijuana, among others. The views expressed above are not necessarily those of Rose Law Group pc or its associates and are in no way legal advice. This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.