Pollack: GDP, jobs, homebuilding

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

By Elliot D. Pollack & Co. | Rose Law Group Reporter

U.S. leading indicators paint a more moderate growth projection compared to the first half of the year. The usual suspects creating headwinds for continued recovery are in play – The Delta variant, inflation fears, and continuing supply chain disruptions. Industrial production also declined due to the persistent supply chain issues from weather events and COVID. However, above average growth is still anticipated for the remainder of this year and next. Many are also pointing to the second half of 2022 before most supply chain issues are resolved. 

Home builder confidence is up despite labor and material shortages creating upward pressure on prices and downward pressure on construction permits, starts, and completions. Low mortgage rates have helped combat the increase in prices but rates have risen, albeit modestly, over the last two weeks. As home prices continue to increase, mortgage rates remaining low help buyers as they await more existing and new home supply. Any increases to mortgage rates will further compound the affordability problem.

Here in Arizona, more employment growth was reported for the month of September with 20,400 new jobs for the month and a 12-month total increase of 143,900 jobs. This equates to a 5.1% increase year-over-year. The unemployment rate also fell, from 6.2% to 5.7%. The labor force also increased by over 6,300 in September.

U.S. Snapshot:

  • The Conference Board’s Leading Economic Index increased 0.2% in September. This continues to signal moderate growth after strong growth seen earlier this year. The Conference Board’s GDP growth forecast is 5.7% for 2021 and 3.8% for 2022.
  • Industrial production declined 1.3% in September as the effects of Hurricane Ida continue to linger and motor vehicle and parts production continued to face a shortage of semiconductors. Capacity utilization declined from 76.2% to 75.2% in September.
  • Rates on 30-year mortgages rose for the second consecutive week in the week ending on October 21st and is now up to 3.09%. 
  • Total permits at a seasonally adjusted annual rate dropped 7.7% in September. The majority of the decline was in the multi-family sector as single family permits only fell 0.9%. Total starts declined 1.6% as builders continue to face shortages of labor and labor materials, leading to a decline of 4.6% in completions.
  • According to NAR’s latest existing home sales, single family home sales were up 7.7% for the month and down 3.1% from a year ago. Prices have increased 13.8% from a year ago. 

Arizona Snapshot:

  • Arizona added 20,400 jobs in September and 143,900 from a year ago. Greater Phoenix contributed 16,600 jobs in the month with Greater Tucson adding 3,200. Year-to-date, Arizona employment is growing at 2.8%, Greater Phoenix is up 3.4% and Greater Tucson at 1.4%.
  • According RLBrownReports.com results for new home building in September:
  • Greater Phoenix saw a decline in permits of 27.2% from a year ago. While permitting activity has declined in the second half of the year, the 2021 year-to-date remains 17.2% higher than a year ago. 
  • In Greater Tucson, new home permits reached 455 units, up nearly 20% from a year ago. For the year, permitting activity is up 28% from 2020.
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October 2021