Economic Indicators: Weekly Update for July 8, 2011

A weekly analysis of the economic data released during the past week, and how current economic conditions are affecting the real estate market.

Palm Coast, FL – July 8, 2011 – Every week the Research staff analyzes key data releases and explain what they mean for you and your business. In this update, we give the highlights of the most important data releases for the week of July 5-July 8, 2011, along with graphs that show the latest movement and overall trends.

At a glance, this table shows the forecast for some of the most pertinent weekly data for REALTORS® to keep in mind. This changes from week to week as new data becomes available. The directional shift notes the trend from last week’s numbers. For the full forecast from the latest Pending Home Sales release, click here (PDF).

Highlights for Tuesday, July 5, 2011:

• Factory orders were up slightly in May.  This data is not terribly exciting, nor all that timely due to a long lag in data gathering.  It still should be viewed as a confirmation of rising business spending.
• Business spending, backed by healthy corporate profits, is the only economic game in town at this particular phase of recovery.  State and local government spending will be sliding down to meet the balanced budget rules.  Federal government spending is also expected to be shaved.
• Consumer spending is barely moving ahead because of high unemployment situation.  Exports are rising, but so are imports, with no net measurable improvement in the international trade picture.  Therefore, the strength of economic recovery will depend principally on how fast large businesses utilize their strong cash reserves.  Small businesses, which historically has been the key to strong economic expansion, are hampered by tight lending conditions.

Highlights for Wednesday, July 6, 2011:

• Mortgage rates rose last week, but more people applied to obtain mortgages.  Mortgage applications for home purchase rose 4.8 percent, while applications for refinance declined 9.2 percent.
• It is not uncommon after a period of very low rates for people to rush in at the first sign of a rising trend.  They understand the great offerings may not last.
• The index for purchase applications is up 12 percent from one year ago, though the trend since the beginning of the year has been mostly sideways, with only slight ups and downs and no meaningful changes.

Highlights for Thursday, July 7, 2011:

• Today’s two job reports suggest improvement in the labor market, though improvement is still shy. New jobless claims finally declined by 14,000 to a seasonally adjusted 418,000 after several weeks of consistent increases.
• Decline could have been greater but for Minnesota’s 2,5000 state employees who had to file for claims due to the government shot down. Still, this decline brings the four-week moving average of new claims only 3,000 down, to 424,750.
• Economists generally estimate that one new claims fall below 400,000, the economy is creating more jobs than losing. Continuing unemployment benefit claims are also down, a significant  43,000 to 3,681,000 in the week ended June 25.

Friday, July 8, 2011:

• June payrolls continued May’s pause and led to a slight uptick in the unemployment rate to 9.2 percent.  The economy added a net of only 18,000 non-farm jobs in June and May’s figures were revised down slightly.  By comparison, net job growth averaged 215,000 per month from February to April.
• The recent trend of loss in government jobs continued; an additional 39,000 were shed in June, mostly at the local government level but all three levels of government saw payrolls decline.
• This means that the private sector added a net 57,000 jobs in June.  By comparison, net private job growth was 240,000 per month from February to April.  This second month of weaker employment data downgrades the unemployment forecast for 2011 slightly.  Job growth was relatively dispersed by industry.  Only the financial activities and construction sectors saw net job declines.
• While the recent stagnation is discouraging, it is an improvement over one year ago when the employment rate a year ago was 9.5 percent and while the private sector was creating jobs, the net job change was a loss.
• Wages were little changed in the period and saw a modest 1.9 percent increase for the year.  Price data will be out next week and will likely show that the cost of goods increased faster than the growth in wages in the last year.  NAR expects a sustained 3.5 percent consumer price inflation rate through the year end, which means that the Cost-of-Living-Adjustment for Social Security recipients will rise by about 3.5 percent in 2011.  However, workers’ wages may not rise to that level next year.