The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
By Elliot D. Pollack & Company
The Milken Institute recently came out with a report ranking the best cities/metro areas in the country. The ranking emphasizes jobs, wages, and high-tech growth plus this year includes new measures for housing affordability and broadband access. Among the ranking of large metro areas, Greater Phoenix came in seventh behind communities such as Provo-Orem, Utah (ranked 1st), Austin (3rd), and Raleigh (5th). Nashville was ranked just behind Greater Phoenix.
Greater Phoenix’s ranking is certainly an indicator of a strong, surging economy, one that is built on a diversified employment base rather than just population growth (which we are a leader in as well). But the amazing thing is that Phoenix can attain this ranking given its size. Phoenix is by far the largest metro area on the list of top ten communities and some cities are so small they don’t even belong on the same list. Only Denver and Seattle come close to matching our population level. For Phoenix to even be on the list is testament to the efforts of our economic development organizations, the universities, and the businesses that now are making their way here from high tax states. Remember, Greater Phoenix is the tenth largest metro area in the country behind Atlanta. In 2019, we passed by Boston into tenth place. We are no longer a backwater cowboy town, but instead have a highly educated workforce and growing high-tech economy for the 21st Century.
The Milken Report does point out a few concerns. While our housing stock is affordable relative to other metro areas, housing rents grew by 7% in 2019 and home values rose by 5.8%. Since the publication of the report, housing value growth is even higher, probably reaching 12% year-over-year. So we need to keep things in perspective and hope we don’t become a victim of our own success.
- Personal income had its biggest drop in 10 months in February. The decrease is likely only temporary and the result of cold weather and the fiscal stimulus distribution in December and January. The combination of $1.9 trillion fiscal stimulus and the increase in vaccinations are expected to boost the U.S. economy to its best year in decades.
- Economic activity was stronger in the fourth quarter than previously estimated. Real GDP was revised upwardly from 4.1% annualized growth rate to 4.3%.
- Consumer sentiment continued to improve in March, in part due to the increase in vaccination and the distribution of the third round of relief checks.
- Interest rates increased again last week. Interest rates have increased 50 basis points since the start of the year. Despite the increase, mortgage rates remain 9.4% below a year ago.
- New home sales fell more than expected in February. Month-over-month, the number of sales fell 18.2% but remained up 8.2% from a year ago. The median sales price increased 5.3% from a year ago. Higher costs and delays continue adding pressure to the cost.
- Existing sales dropped 6.6% in February from January’s level. Despite the decrease, February 6.2 million (SAAR) was higher than the levels seen in a pre-pandemic February 2020. The low levels of inventory continued pushing prices higher and the recent increase in mortgage rates will start to affect the affordability going forward.
- Employment (NSA) had positive monthly gains in February. The state as a whole added 17,100. While its biggest metros accounted for 13,400 in Greater Phoenix and 500 in Greater Tucson. The primary gains were in Trade, Transportation, and Utilities, Leisure and Hospitality and Government.
- Arizona has recovered 64.5% of the jobs (S/A) lost due to the pandemic. Greater Phoenix and Greater Tucson have recovered 67.1% and 49.3%, respectively.
- Lodging occupancy continues to recover in February, but it remains 26.3% below a pre-pandemic February a year ago.