The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
By Elliot D. Pollack & Company
The U.S. economy is roaring back, and the expectation remains for real GDP growth to surpass any annual growth seen in the last few decades. The faster the vaccination targets are reached, and herd immunity is achieved, the faster consumers will return to a pre-pandemic norm. The latest March data appears to back this notion:
- 916,000 jobs were added
- Nearly 14 million jobs have been created since the recovery started
- ISM’s Manufacturing PMI increased for the 10th consecutive month and reached its highest level since December 1983
- ISM’s Services PMI reached its all-time highest level
Let’s take a deeper look at the job market and the progress of its recovery. In February 2020, there were 152,523,000 jobs. March and April saw job losses that totaled 22,362,000. Overall, the economy has recovered 13,959,000 or 62.4% of the jobs lost (see chart below).
No sector has fully recovered all the jobs lost. Only Natural Resource & Mining and Government have suffered more losses. Leisure & Hospitality was the most negatively affected sector, losing 8.2 million jobs (48.6% of the jobs within that sector) or 36.8% of all jobs lost. The job losses within the Leisure & Hospitality sector were in Food Services & Drinking Places (72.6%), Arts, Entertainment, & Recreation (16.2%) and Accommodation (11.1%). So far, over 5.0 million of those jobs have been recovered (61.9% of jobs lost in that sector) accounting for 36.5% of all jobs recovered.
While the possibilities of a setback remain (a variant of the COVID-19 or some other unforeseen disaster), the fundamentals for strong economic activity and job growth in 2021 and 2022 are in place.
On to last week’s data and news. The Fed continued to signal they expect to keep interest rates at near zero through 2023. Jerome Powell stated they needed to see a string of consecutive job growth near a million before changing their policy. Initial claims increased but are down 87.9% from a year ago. Locally, the housing market continues to be red-hot.
- Initial unemployment claims increased 16,000 to 744,000 in the week ending April 3, 2021. The number of claims remains high but has made tremendous progress (down 87.9%) from a record of 6,149,000, a year ago.
- The record-setting economy continues. According to ISM’s Services PMI, the index reached an all-time level of 63.7% this past March. The index was up 15.2% from a month ago. The Service industry represents about 70% of the U.S. economy.
- Durable orders had a monthly decline of 0.8% in February. This was the first decline since April. The decline was above economists’ expectations, but a quick rebound is expected.
- Consumer credit had its largest increase since November 2017 with an increase of 0.7% or $27.6 billion, in February. Revolving credit increased 0.8% in February’s for the first increase since July 2019.
- The number of home listings continues to dwindle, according to the latest data from the Cromford Report. In March, the number of active listings declined by 7.2% from a month ago and 45.6% from a year ago. Despite the lack of inventory, the number of resales increased by 17.2% from a year ago. The high demand and lack of inventory continues to push prices higher, as the median sales price grew by 19.0% from a year ago.
- The story is similar in Greater Tucson. According to the Tucson Association of Realtors, the number of homes for sale (22.2%) decreased and the number of homes sold increased (5.3%) in March from February. This continues to add pressure, as the median sales price increased 10.4% in the month and 25.5% from a year ago.