Pollack: Optimism is mounting

The Monday Morning Quarterback

A quick analysis of important economic data released over the last week

By Elliot D. Pollack & Company

Optimism is mounting with the continued rollout of COVID-19 vaccinations and it has become apparent that households have begun to make plans for the future. Stocked with the latest stimulus payment from December-January, households have paid down more consumer debt and made purchases. It is showing up in the employment data as well. January employment figures were revised upward substantially from 49,000 to 166,000. February was even better, with an estimated 379,000 jobs added, far outpacing expectations. Leisure and hospitality accounted for most of the job gains, with 355,000 jobs added. Employment gains also came in the retail sector, manufacturing, professional and business services, and education and health services. While the U.S. still has more to go to recover all of the jobs lost and encourage full labor force participation, February was a great step in that direction.

Here locally, the housing market continues to dominate the discussion. Resale homes are continuing their torrid growth in prices with a 19.5% year-over-year gain. New home prices are up by 4.9% which is modest relative to existing home prices. The median price of a new home is now just 8% more than the median resale home price, something not seen in decades. And sales volumes for both new home and resales are up nearly 7% compared to last year.

U.S. Snapshot:

  • 379,000 jobs were added in February. This combined with the upward revision from 49,000 to 166,000 in January points to the economy heading in the right direction. Leisure and Hospitality led the way by adding 355,000 jobs. Government and Construction had the largest losses for the month.
  • February 2020 was the pre-pandemic peak for employment with 152.5 million jobs. Since February 2020, the economy lost 22.4 million jobs and recovered 12.9 million or 57.6% or the jobs lost. The latest employment report estimates the total number of jobs in February 2021 at 143.1 million, down 6.2% from a year ago.
  • ISM’s Manufacturing index reached its highest level since February 2018 last month. February reading is among the highest levels in the history of the index. February’s level of 60.8% was up 3.6% from January and 20.9% from a year. The reading signals the expansion of the manufacturing sector. The service sector continued growing as well. February’s reading came in at 55.3%, down from 58.7% a month ago. While the index decreased, it remained above the 50% threshold, indicating growth in the service sector.
  • U.S. consumer credit had a slight decline in January. Non-revolving credit (auto and student loans) increased 0.3% for the month and 3.8% for the year. Revolving credit (credit cards) declined 1.0% for the month.
  • Manufacturers’ new orders beat estimates in January, increasing 2.6% from a month ago and up 2.8% from a pre-pandemic January 2020.
  • Construction spending continued growing in January. Total construction reached a record high $1.5 trillion for this series. The growth was fueled by both public and private construction growing at 1.7% for the month.

Arizona Snapshot:

  • According to the Information Market, 1,479 new homes and 7,863 resales were sold in February. Median resale price increased nearly 20% to $352,000 compared to the price of new home at $379,900.
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