Pollack: Good news never felt so bad

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

After 27 months, the U.S. economy has fully recovered the 21.9 million jobs lost during the pandemic. A better than predicted jobs report finally brought the U.S. to full jobs recovery, though there are still many more jobs to be gained to put us back onto our historical trajectory. Even so, the job market has certainly been a bright spot for the economy, with unemployment now at a 50-year low. We still have more businesses looking for workers than we have workers looking for jobs.

So why is consumer confidence so low? Why are so many dissatisfied with the economy? Why is there still a growing consensus for recession occurring in the next 12 months?

Inflation and uncertainty. The increase in prices for nearly everything we buy has largely erased the good feelings and positive economic effects that occur in a strong job market. Many have effectively lost income despite getting a raise after adjusting for the higher cost of living. And we are not seeing as much long-term business investments that can lead to higher levels of prosperity. It has been more common to see one-time hiring bonuses instead. That is a classic symptom of uncertainty.

There are also continued signals from the Fed that they would like to slow demand further to rein in inflation. But, besides gas prices abating over the last month, we have not seen any notable relief. Market forces such as supply constraints, including the lack of labor force, still remain and will play a major role in determining how long high inflation remains with us. With now more than two years of hindsight, we are painfully aware that it will be a slow process to work through all of the economic disruptions.

U.S. Snapshot:

  • The U.S. economy added 528,000 jobs in July, for a total of 22.0 million jobs added since the start of the recovery. Six of the eleven sectors have fully recovered. Leisure and Hospitality, the sector that lost the most jobs, has recovered almost 7.0 million jobs, or 85.2% of the jobs lost. The unemployment rate declined to 3.5%.
  • ISM’s Manufacturing Purchasing Manager’s Index (PMI) declined again in July. The index declined to 52.8% and was down from 59.9% a year ago. The Services PMI increased to 56.7% but remains well below the 64.1% seen a year ago.
  • Job openings fell 5.4% or 605,000 in June to 10.7 million. The number of hires outpaced separations, 6.3 million to 5.9 million. The number of quits continues to be elevated at 4.2 million.
  • Consumer credit increased by $40.2 billion in June. Revolving credit increased $14.8 billion and non-revolving credit increased $25.4 billion for the month. Consumers have started to borrow more, which is historically been viewed as a positive for the economy. Consumers tend to borrow more when times are good and stop when times are bad. However, consumers could alternatively be borrowing due to higher inflation and interest rates.

Arizona Snapshot:

  • Listings across Greater Phoenix increased 86.5% to 19,217 in July from a year ago, according to the Cromford Report. The number of resales declined 32.5% to 6,171.
  • The Information Market’s Maricopa County housing data saw resales activity drop by 37.1% from a year earlier. The median sales price dropped 4.1% for the month but was still up 14.4% from last year.
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