Pollack: Signs of improvement

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

The U.S. labor market saw continued signs of improvement with initial claims falling below 300,000 for the first time since the pandemic and economic fallout in March, 2020. Continuing claims are also down and the number of people quitting their job rose again. This is typically viewed as a sign that the employee has additional options to improve their employment situation. The combination of less unemployment claims and higher rates of people quitting for other opportunities illustrates that the labor market is tight. Employers want to hold onto their employees amid increased competition for labor. Job openings declined but are still at substantially elevated levels, remaining above 10 million nationwide. Retail sales also increased month over month and represent a nearly 14% increase over this time last year.

On the downside, the consumer price index ticked up once again and annual inflation for September stands at 5.4% (4.0% for core inflation). The Blue Chip Economic indicators panel also downgraded their GDP forecast but it is still high by historic standards.

Locally, retail sales increased for the month of August in both the State of Arizona and Maricopa County. Newly released apartment data from RealData, Inc. is reporting a consistent trend of exploding rents and declining vacancy. Though still conservative compared to other analytics firms tracking the Phoenix apartment market, the story is the same: there is pent up demand and not enough supply.

U.S. Snapshot:

  • Initial claims fell below 300,000 for the first time since the start of the pandemic. In the week ending October 9th, initial claims were 293,000, down 10.9% from the week prior and 64.8% from a year ago.
  • The Blue Chip Economic Indicators panel downgraded their forecast for the fourth consecutive month in October. Despite the recent decline from the panel, their expectations remain positive, with an expected growth rate of 5.7% for 2021 and 4.1% for 2022. If realized, this would be well above the growth we have seen over the last decade.
  • The number of job openings remained above 10 million for the third consecutive month as the number of employees that quit their job reached a record level of 4.27 million. Plenty of jobs are available allowing workers to seek better hours, better wages or better opportunities.
  • The consumer price index picked up again in September with a monthly increase of 0.4% for all items and 0.2% for core inflation. Both of these measures are up significantly from a year ago, with all items seeing an increase of 5.4% and core inflation being up 4.0%. The recent increase in energy prices could keep inflation higher in the coming months.
  • Despite shortages and rising inflation, consumers continued to signal their willingness to spend in September. Retail sales saw an increase of 0.7% for the month and 13.8% from a year ago. The shipping bottlenecks will play a role as consumers step up their demand due to the holidays straining even further an already stretched global supply chain.

Arizona Snapshot:

  • Apartment rent has started to see a similar increase as we have seen in the for-sale market, based on RealData’s latest quarterly data. Rents saw an annual increase of 18.2% in the third quarter. Despite the increase, vacancy rates declined to 5.8% in the same time period. And these are the most conservative estimates of the apartment market. Data from RealPage Analytics reported 26% year-over-year rent growth for September in Greater Phoenix and vacancy hovering closer to 3%.
  • Retail sales increased in August. Arizona saw an increase of 14.2% from a year ago and 15.6% in Maricopa County.
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