Pollack: The stage is set

The Monday Morning Quarterback
A quick analysis of important economic data released over the last week


Nationally, initial claims for unemployment insurance rose and the year ended with negative employment growth as expected. The rise in COVID cases after the holidays has created more stress on hospitals and dampened demand for consumer services such as travel. Indeed, leisure and hospitality sector has taken the biggest hit over the past year. However, no sector grew either.

By spring, our hope is that with continued vaccinations, shutdowns could be a thing of the past. As the economy reopens, people will spend money because their savings rate has been so high. Those unemployed due to COVID-19 will be able to regain employment. And given the large gap between potential GDP and actual GDP, the stage is set for rapid economic grow that will be very strong (probably in the third and fourth quarters) and will be followed by not quite as strong but still above normal growth at least through 2023.

So, again, ignore the news about the poor economy over the next couple of quarters. It is unavoidable but also temporary. Focus on the period that will follow. Virtually all of the economic indicators will return or exceed February 2020 levels very quickly once vaccinations are available for enough Americans.

This episode of history is coming to an end. In the meantime, remain vigilant. Be careful. Avoid crowds. Wear a mask. Social distance Wash your hands. And get inoculated when you can.

U.S. Snapshot:

  • U.S. employment ended 2020 with job losses for the first time since 2010. In 2020, the economy lost 8.7 million jobs. The majority of losses were in leisure & hospitality (3.4 million), trade, transportation & utilities (1.2 million), professional & business services (0.9 million) and education & health services. No sectors grew during the year.
  • For the month of December, jobs decreased by 140,000. The majority of losses were in leisure & hospitality (498,000). The sector felt the impact of the rising number of COVID cases seen in the month of December.
  • No change in in the unemployment rate in December (6.7%) from November but it is has nearly double (3.6%) from December 2019.
  • ISM Manufacturing PMI increased to 60.7 in December up from 57.5 in November. The increase beat expectations and reached the highest level since August 2018. The service sector grew for a seventh consecutive month according to ISM’s Services PMI. The December number was up to 57.2 from 55.9 in November indicating faster growth in the service sector for the month.
  • Factory new orders beat estimates in November growing at 1.0% for a 7th consecutive monthly gain. Year-over-year, factory orders are down 0.4%. The inventories-to-shipments ratio remained at 1.41 and is compared to 1.40.
  • Consumer credit grew by $15.3 billion in November. The increase came from nonrevolving credit ($16 billion) as revolving credit decreased ($700 million) from October.
  • U.S. motor vehicle sales (SAAR) increased in December and ended the year at 16.3 million according to the BEA. This is down from 16.8 million but up significantly from 8.7 million in April. Despite the recovery since April the December number is down from 3.2% from a year ago.
  • Total construction (SAAR) increased 0.9% in November and 3.8% for the year. The monthly increase was led by 1.2% while public construction while private construction was down 0.2%.

Arizona Snapshot:

  • According to the Information Market, total sales had a slight increase of 0.03% in 2020. New build homes let the way increasing 13.2% and resales decreased -2.2%. The lack of resale inventory suppressed sales for the year. Despite the pandemic housing had a good year.
  • Apartment vacancy rates close 2020 at 6.7% in Maricopa County according to RealData. Average rent increased 4.5% to $1,182 while supply increased 3.5% compared to a year ago.
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