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Condition of The Economy ~ April 2013

U.S. Snapshot
U.S. initial weekly unemployment insurance claims continued to decline. BlueChip consensus forecast indicates growth in 2013 with a modest acceleration in 2014. Credit grew but mostly for non-revolving credit. Total wholesale trade numbers slowed in March but only modestly up from year earlier levels.

The trends of the last year continued in Greater Phoenix housing over the last month. Single family listings declined modestly as did the total sold. Normal sales continue to play a larger role in the mix as foreclosures continue to decline. Resale prices continue to increase and now stand almost 25% over a year ago. Days on market continue to decline. This is all good news.

Arizona weekly unemployment total claims have actually increased over the past month. They are, however, still almost 40% below year earlier levels. The Department of Economic Security modestly reduced its forecast for 2013 employment due to issues related to sequestration. The forecast still calls for growth in 2013 and more rapidly so in 2014, yet still slow by historic standards in Greater Phoenix.

Initial claims for unemployment insurance have been in a significant downtrend over the last month (this is a positive because there are fewer people filing). Initial weekly claims are down to 323,000 compared to 348,000 a month ago. The Blue Chip national consensus forecast suggests that real GDP will be up a modest 2.0% this year. This is because of the sequestration effect on the second and third quarters of this year. For 2014, a more respectable but still modest 2.7% growth is expected.

Credit outstanding continues to grow (up 3.4% at an annual rate in March). But, the real story is that there has been very little growth in revolving credit (credit card debt). Non-revolving credit (used for items such as cars and light trucks), continues to grow rapidly in response to continued car and truck sales.

Wholesale trade numbers in the U.S.showed modest growth in March compared to February, but are still up 4.7% from year earlier levels. While inventories were up in March, the inventory to sales ratio was up only modestly for the month and now stands at about 1.21 compared to 1.17 a year ago.

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Condition of The Economy ~ February 2013


Total weekly unemployment insurance claims have been flat for the last several weeks. Even so, total claims are down 37.8% from a year ago compared to a decline of only 1.3% nationally. The national number is shocking. The Arizona data suggests slow growth.


The latest U.S. Blue Chip consensus forecast shows that the consensus now predicts that real (inflation adjusted) GDP will register year over year growth of 1.9% in 2013 and increase by 2.4% on a 4th quarter/4th quarter basis. This is true despite the fact the real GDP was down slightly in the 4th quarter of 2012. Growth is still expected to be mediocre in 2013. As mentioned above, U.S. initial unemployment insurance weekly claims remain high. The gains made a month ago appear to have been transitory. In fact,claims are down only 1.3% from a year ago.

Nonfarm business sector labor productivity decreased at a 2.0% annual rate during the fourth quarter of 2012. The decrease in productivity reflects increases of 0.1% in output combined with a 2.2% increase in hours worked. This is not good news. Productivity is commonly linked to standard of living. Productivity must grow for our standard of living to grow. Unit labor costs in non-farm businesses increased 4.5% in the 4th quarter of 2012. This is due to the combined effect of the 2.0% decrease in productivity and a 2.4% increase in hourly compensation. If this were to continue, it would create inflationary pressures.

The consumer continues to take on new debt at a steady and strong clip. But, whether it points to rising demand is more problematic. Consumer credit increased at an annual rate of 6.3%. But, the revolving side, which is the credit card side, to these totals isn’t always adding to the total. Revolving credit has been very flat, up a little bit one month and then down a little bit the next and is down $3.6 billion in the latest data. What is going up is non-revolving credit where vehicle sales come into play, and they have been very strong. But, this is also where student loans are tracked. And they continue to climb straight up without much monthly variation. Thus, aside from vehicles and student loans (how do you spell bubble), consumers aren’t taking on much debt, a factor that is limiting the contribution from the consumer sector.

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