Elliott D. Pollack & Co.
The Monday Morning Quarterback /A quick analysis of important economic data released over the past week
There’s much to report this week and most of it is positive. It appears that the economy is mildly accelerating and that much of the drama caused by increases in taxes and budget fighting combined with questions over how much the Fed would cut back on its bond buying program is over for now. In addition, stronger consumer spending combined with a run up in business inventories and higher levels of spending by business on software allowed the third quarter real GDP numbers to come in at a healthy 4.1%.
More details on the week’s data are below. This will have to hold you over until the MMQ returns from its holiday break in two weeks.
Arizona Snapshot
The most important economic news locally was on the employment front. For the state, the unemployment rate (seasonally adjusted) dropped from 8.2% in October to 7.8% in November. The U.S. seasonally adjusted rate declined from 7.3% in October to 7.0% in November. Yet, over the last year in Arizona, the entire decline in the rate was due to a drop in the size of the labor force rather than gains in the number of people working.
For the state, 47,500 nonfarm jobs were added in November compared to a year ago. This is a gain of 1.9%. Nine of the eleven major sectors reported gains. Only government and manufacturing shed jobs. Through November, the state now ranks 7th in terms of employment growth out of the 50 states.
In Greater Phoenix, the unemployment rate now stands at 6.0%. Over the last year, the area gained 41,600 net new jobs, a gain of 2.3%. The largest gains were in education and health services, trade, transportation & utilities, financial activities, professional & business services, construction, and leisure and hospitality. Only government, manufacturing and mining declined. The Greater Phoenix area now ranks 7th out of 28 major employment markets in the U.S. this is up from last in 2010.
In Greater Tucson, the unemployment rate was reported at 6.2%. Tucson added a modest 900 jobs over the last year for a 0.2% gain.
Retail sales in the state were up 7.2% in October from year earlier levels. In Maricopa County, retail sales were up 11.4%. The increase was across the board with the exception of construction, and wholesale. The largest gains were in motor vehicle dealers and miscellaneous retail.
In Arizona, the negative equity share was 22.5% in the third quarter of this year compared to 38.6% a year earlier as reported by CoreLogic. This is a significant recovery, but, still leaves a lot of room for improvement. As for Greater Phoenix, the numbers were 41.1% a year ago and 23.2% in the third quarter of this year.
U.S. Snapshot
Corporate profits were reported to be very strong in the third quarter and now are at record highs in terms of absolute levels and as a percent of real GDP. Net cash flows were also at high levels. This is a positive as it will most certainly lead to more hiring and investment.
Leading indicators continued to rise in November and now stand at 98.3 compared to 97.5 in October and 93.4 a year ago.
The consumer price index for all urban consumers was reported to be up in November by only 1.2% from a year ago and was unchanged from October. This is below the Fed’s target of 2.0%. The Fed is keeping an eye on this because it is concerned about deflation-a decline in prices. Such an event would probably cause consumers and business to delay purchases and would make it more onerous to repay previously accumulated debt.
Industrial production continued to increase in November and is now 3.2% above year earlier levels. While utilities output was up significantly, manufacturing was also quite healthy. Because of this, capacity utilization in November increased to 79.0, up from 78.2 in October and 77.9 a year ago. This is good news as capacity levels are getting closer to the point where business will be spending more on new capacity. That would result in more hiring.
30 year fixed mortgage rates averaged 4.47% for the week ending Dec. 19. This is up from the previous week when it averaged 4.42% and a year ago when it averaged 3.37%.
New housing seemed to be doing better nationally than in Arizona in November and December. The U.S. NAHB housing market index increased in December to 58 from 54 in November and 47 a year ago. In addition, nationally, single family building permits were up in November (29.6%) compared to year earlier levels. Local data will be reviewed below.
Nationally, existing home sales fell in November.
CoreLogic reported that 13.0% of home owners who had a mortgage were under water as of the third quarter of 2013. This is down significantly from the 22.0% who were under water a year earlier.
