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. job market remains a bright spot among economic indicators, making it tough to call a recession any time soon, though we do believe it is looming in 2023. As the Fed continues tightening to induce a slowdown and works toward clamping down high inflation, they have indicated that they expect the job market to eventually soften. But we are certainly not there yet. And we may be a ways off with both monetary and fiscal policy sending mixed incentives to businesses and households.
For now, we’ll take the positive economic news. Jobs are growing, we also got more workers to join the labor force, there are still far more job openings than there are people looking for jobs, and we still have an expanding manufacturing sector. Consumer confidence also jumped which should boost spending in the short term.
Here locally, the most recent Case-Shiller Home Price Index (reported for June so it is backwards looking) has our market in 4th place in terms of price appreciation on a year-over year basis. The latest housing data for Phoenix has us trending toward a buyers’ market with recent price declines and increased inventory to choose from. Prices are still high but, because demand has cooled substantially, sellers are adjusting prices downward. The bad news is that mortgage rates have been trending upward again and hovering over 6% versus 5% at the beginning of August. That has negated any home price declines we’ve seen when it comes to affordability.
With weakness on the demand side, we expect that housing prices could continue to decline somewhat through the end of the year, but many sellers are in great financial shape and may choose a different route as opposed to selling at a far lower price, such as renting the home or simply removing their listing and waiting for a price recovery.
U.S. Snapshot:
- The U.S. job market remained very tight in August. A total of 315,000 jobs were added. This is well above the 2019 average of 164,000 jobs per month. The August increase was down from the 526,000 jobs added last month. July and June combined for a downward revision of 107,000 jobs.
- The U.S. reported an increase in the unemployment rate from 3.5% to 3.7% in August due to an increase in the labor force. During the month, the labor force increased by 786,000, with the number of employed and unemployed increasing by 442,000 people and 344,000 people, respectively.
- Job openings unexpectedly rose 1.8% in July, as the number of separations and hires dropped 1.3% and 1.1%, respectively. There were a total of 11.24 million available positions with 5.67 million unemployed.
- August’s consumer confidence level increased for the first time in three months. The index jumped from 95.3 to 103.2. The positive movement in the confidence gauge bodes well for consumer spending.
- ISM’s Manufacturing PMI was unchanged in August at 52.8%, signaling growth in the manufacturing sector. The index has declined 11.6% from a year ago. This is still good news as GDP has declined two consecutive quarters.
Arizona Snapshot:
- The deceleration in home price increases continued in June according to the Case-Shiller Index, which is a lagging indicator for home prices. Greater Phoenix annual growth rate slowed for the fourth consecutive month to 26.6% from 29.7%. However, Greater Phoenix remained fourth in terms of price growth behind Tampa, Miami, and Dallas.
