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. job growth fell to the slowest pace of the year in September, a sign the Delta variant and a persistent shortage of workers weighed on the economic recovery. Despite the poor job numbers, the unemployment rate fell to 4.8% last month from 5.2% in August due to the fact that many workers gave up the job search and exited from the labor force last month. The labor-force participation rate—or the share of workers with a job or actively looking for one—dipped slightly to 61.6%, down from 63.3% in February 2020 ahead of the pandemic.
The labor market last month wasn’t entirely bleak. Private-sector employers hired at a decent clip—adding 317,000 jobs last month. A decline in public-sector employment weighed on the overall job figure. Some economists believe the drop may have been statistical rather than real, resulting from flaws in the way the government adjusts data for seasonal factors.
Keep in mind that the September job numbers were collected in the middle of the month when the Delta variant was at its height. A revision to the numbers could also occur similar to what happened in August when 131,000 jobs were added to the monthly report.
Before the American Rescue Plan passed, the Congressional Budget Office projected that a return to an unemployment rate of 4.8% would not occur until 2023. Historic growth since then has put us in a much better place than expected. While individual months may fluctuate to some degree, and certain sectors may grow or lag as a result of a variety of factors, the trend since February is one of rapid recovery.
The Delta variant is still a significant drag on the economy although infections, hospitalizations, and deaths are declining. In the U.S., the worst infections occurred in January 2021 when the 7-day moving average of cases rose to 252,700. Subsequently cases declined to 22,200 in June but then the Delta variant came rolling in and daily cases rose to 161,500 in early September. As of October 8, the 7-day moving case average declined to 92,600 or a 43% reduction from September.
Arizona is lagging slightly behind the U.S. in the decline of infections. In early September we hit a high of 3,260 daily cases. That number has now declined to 2,400 cases (7-day moving average) for October 8 or a reduction of 26%.
Much of the data on vaccinations from the CDC cites the percent of the population that is vaccinated. However, until recently, persons under the age of 16 were not recommended for the vaccine. For instance, 56.4% of the U.S. population is fully vaccinated according to the CDC. However, for those persons most at risk, adults aged 18 years and older, 67.8% are fully vaccinated. For Arizona, similar data is not available, but we estimate that around 60% of adults 20 years of age and older are fully vaccinated. Slowly vaccinations are reaching levels that may start to tamp down the impact of the Delta variant.
In other news:
- U.S. employment grew at its lowest level in September. The economy created only 194,000 jobs- well below the 607,000 January to August average. The majority of the gains were in Trade, Transportation, and Utilities with 120,000 jobs and the government supersector lost 123,000 jobs.
- Since the start of the recovery, a total of 17.2 million jobs have been created. Only 4.97 million jobs remain to reach the pre-pandemic level. No supersector has fully recovered, with only Trade, Transportation, & Utilities and Financial Activities being above the 90% recovery threshold.
- The ISM Service Purchasing Managers’ Index (PMI) saw a slight increase from 61.7% to 61.9% despite supply shortages and weak employment creation. This marks the 7th straight month above 60%. Any reading above 50% signals growth in the sector.
- Consumer credit increased $14.4 billion in August. Nonrevolving credit led the way with $11.4 billion, while revolving credit increased $3.0 billon.
- New orders for U.S. manufactured goods increased 1.2% for the month. This is good news as raw materials and labor shortages continue to negatively affect the economy.
- As of August 2021, Greater Phoenix had recovered all non-farm jobs lost during the pandemic. Arizona is not far behind regaining 93% of all jobs lost. Most industries in the Phoenix area have gained back more jobs than they lost over the past year including manufacturing and even retail trade. Industries that have not fully recovered include Information, Leisure & Hospitality, and Government. Accommodations, which is driven by the hotel industry, today only has 59% of the jobs that it had in March 2020. This equates to a loss in the industry of 11,500 jobs. Restaurants and bars have nearly recovered to pre-pandemic levels. Government has 14,500 fewer jobs than it had in March 2020.
- According to the Cromford Report’s latest housing data, the number of resales in Greater Phoenix increased by 3.6% for the month but was down 2.7% from a year ago. The number of active listings was down 16.1% from a year ago to 11,469. Prices, on the other hand, were up 2.2% for the month and 25.5% from last year.
- The resale market in Greater Tucson continued to tighten based on the Tucson Association of Realtors latest numbers. The inventory of single family homes is down 3.4% from a year ago, but prices are up 24.6% in the same time period.