Naroff Economic Advisors — January Employment Report

Posted on February 3, 2012 by Steve Royek

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff
President and Chief Economist

INDICATOR: January Employment Report

KEY DATA: Payrolls: +243,000; Private Sector: +257,000; Unemployment Rate: 8.3% (down 0.2 percentage point)

IN A NUTSHELL: “The economy is starting to turn the corner and the labor market is finally becoming a beneficiary of the improving economic conditions.”

WHAT IT MEANS: For months the data were coming in stronger than expected but it was not clear that businesses were willing to loosen the hiring strings. Well, that may be changing. Private sector firms hired a ton of new workers in January and the gains were across the board.

We were not just talking about service sector positions, though there were a lot of those. But while retailers added only about 10,000 workers, manufacturers hired an additional 50,000 people. Construction, wholesale trade, health care, transportation, professional services, temporary help and restaurants all joined in on the hiring binge.

There was some weakness in finance and information services. The biggest cutbacks, though, were in the public sector, as usual. Local education is still suffering the largest brunt of the budget cutbacks. With hours worked and wages rising, income should be up solidly as well. That will add to spending power, which is badly needed.

But the really good news was on unemployment front. The unemployment rate hit its lowest level in three years. There have been three consecutive declines of 0.2 percentage point, a drop that is much faster than anyone expected but not likely to be sustained.

In January, the improvement came despite a sharp rise in the labor force. That was offset by a huge increase in the number of people who say they are employed, showing it was the economy not statistics that are driving down the rate. (Note: The unemployment rate and payroll numbers come from a different survey.)

MARKETS AND FED POLICY IMPLICATIONS: This is the first time in a long time I can talk effusively about an employment report. It was strong in all components. Payroll gains were across the board. The unemployment rate decline resulted from rising employment not a declining labor force. Wages rose as did hours worked. What was not to like? Nothing!

Since the bottom was hit in February 2010, the private sector has brought back almost 3.7 million workers. Clearly, the jobless recovery is no longer jobless. Still, can we expect the good news to persist? Maybe not at the pace we saw in January, but conditions are such that solid payroll gains and a slow steady decline in the unemployment rate are likely to continue.

Unemployment claims are low enough to support further declines in the rate. Improving conditions in the manufacturing and services sector as reported by the Institute for Supply Management argue that the payroll increases can be sustained.

We still face the restraints of weak housing and limited credit so don’t expect economic or employment growth to surge. But it is likely we will see at least 2.5 million new jobs created this year. The unemployment rate could go below 8% by the fall. Those are not spectacular numbers but just a few months ago not very many people had that in their forecasts (I did, which is why I am saying that.)

Investors should love this report but Mr. Bernanke should be wondering why he insisted on saying that rates will stay low for another three years. If this labor market improvement continues, that is not likely to happen.

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RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.

Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.

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Naroff Economic Advisors — Fourth Quarter 2011 Productivity/Unemployment Claims

Posted on February 2, 2012 by Steve Royek

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff
President and Chief Economist

INDICATOR: Fourth Quarter 2011 Productivity/Unemployment Claims

KEY DATA: Nonfarm Productivity: +0.7%; Unit Labor Costs: +1.2%/Claims: 367,000 (down 12,000); 4-Week Average: 375,750 (down 2,000)

IN A NUTSHELL: “As is the usual case, with employment rising, productivity is moderating and that is raising labor costs.”

WHAT IT MEANS: Businesses have worked extraordinarily hard this recovery to restrain all costs but especially labor expenses. They have done so by working employees harder and longer and that has paid off in large increases in productivity and earnings.

Those days are slowly fading as job growth is picking up. The new workers must be trained and at least until demand rises faster, there is somewhat less for each worker to do. Thus, we are now in the normal productivity slowdown phase.

Output by each worker grew in the fourth quarter at less than half the pace posted in the summer period. The biggest decline was in manufacturing, which has been gearing up to deal with rising sales. That sector went from robust increases to decline.

The slowdown in productivity has some major implications for business costs. Worker compensation is rising and even adjusting for inflation, it actually improved at the end of 2012. For all of 2011, productivity rose at the slowest pace since 2008.

If you want to know why consumer demand has not surged, just look at the compensation numbers: Hourly compensation adjusted for inflation fell by 1.2% in 2011. It’s hard to buy more when your spending power is being diminished.

Even with the moderation in productivity, it looks like hiring will remain on the rise. Weekly unemployment claims fell and the trend level has reached a point where the unemployment rate should go down if not monthly, fairly steadily.

MARKETS AND FED POLICY IMPLICATIONS: Usually you have to give up something to get something and that is the case with jobs. As payroll gains accelerate, productivity normally eases, raising business costs but also increasing worker compensation.

That we are seeing that happen should be cheered as the consumer is the centerpiece of this economy. More jobs mean more income and as the unemployment rate declines, wage gains accelerate. That will provide the means to greater consumption and economic growth.

So both the productivity and unemployment claims numbers, when taken in tandem, paint a picture of an economy recovering. The Fed acknowledged that the labor market was beginning to improve but discounted any major drop in the unemployment rate. The accuracy of that forecast will determine the ability of the FOMC to keep rates low until the end of 2014.

I think unemployment rates will fall faster than the monetary authorities do so I expect rates to rise well before that date. Since tomorrow is employment Friday, we only have a few hours to wait until we see how the year started off but not matter what number prints, the decline in the claims numbers does point to an improving labor market that will ultimately show up in more jobs.

# # #

RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.

Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.

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Naroff Economic Advisors — December Existing Home Sales

Posted on January 23, 2012 by Steve Royek

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff
President and Chief Economist

INDICATOR: December Existing Home Sales

KEY DATA: Sales: up 5.0%; 2011 vs. 2010: Up 1.7%

IN A NUTSHELL: “Home sales are picking up steam but with so many contracts failing, it is not clear how fast conditions can improve.”

WHAT IT MEANS: Once again we see that the housing market is slowly coming back. According to the National Association of Realtors, existing home sales rose solidly in December. The pace was the second highest of the year and it was the third consecutive month that demand has improved. The increases were spread across the nation though the Northeast and Midwest did significantly better than the South or the West.

But there were some disturbing developments in the data. The Realtors reported that one-third of the contracts failed to move to sales, many due to the appraisal process. If you cannot get an appraisal that matches the contract price, mortgages cannot be written. With distressed homes sales making up a growing share of total demand and with the process so restrictive, it is difficult in many places for sellers and buyers of non-distressed homes to complete a deal.

That has led to a second trend, a major reduction in inventory. It appears that many homeowners have given up trying to sell and the supply of houses dropped by over 20% in a year. As for prices, with investors making up a growing share of the buyers and with foreclosures and short-sales so high, it is hard to know what the price of a good house is anymore. I don’t even bother looking at the price data.

MARKETS AND FED POLICY IMPLICATIONS: This was another solid report that shows the potential strength of the housing market and some of the reasons for the weakness. People want to buy homes but too often the process makes it too difficult if not impossible to do that.

Both the existing and new home portions of the market are being hurt by the overhang of so many distress houses. For builders, the ability to compete with these cheap homes makes construction difficult. For people not interested in distressed homes, the appraisal and mortgage process can make it impossible to finalize a deal even if the buyer and seller agree on a fair price.

Until this large inventory is removed or at least made less of a factor, don’t look for housing sales to rise sharply. And to the extent that the trend in prices is a captive of the distressed home problem, prices will remain weak, equity will continue to erode and home sales, worker mobility and construction will be limited.

Unfortunately, there is no simple solution to the problem and that means we are in for a long, long period of recovery which will limit growth. While this report supports those who are saying the economy is improving, it also makes the point that some at the Fed are arguing that the recovery remains tenuous.

# # #

RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.

Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.

RE/MAX Connection Realtors, 1000 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com.

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Naroff Economic Advisors — December employment report

Posted on January 7, 2012 by Elizabeth DiRiego

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff
President and Chief Economist

INDICATOR: December Employment Report

KEY DATA: Payrolls: 200,000; Private Sector: 212,000; Unemployment Rate: 8.5% (down 0.1 percentage point)

IN A NUTSHELL: “It may not be a lean, mean jobs machine just yet but the labor market is finally starting to pick up steam.”

WHAT IT MEANS: Yes, it is all about jobs. That is not a political comment but a commentary on the missing link in the economic recovery. Job growth affects confidence which in turn affects spending and ultimately the willingness and need of business to add workers.

At least in December, companies began the process of rebuilding their workforces at a decent, though hardly robust pace. The payroll gains were widespread. There were some large increases in seasonal sectors such as retail, warehousing and transportation.

It took a lot of people to meet the strong holiday shopping season and get the gifts to everyone on time. But there were also solid gains in the manufacturing, business services, health care and two of the weakest areas, construction and finance. Declines were posted in the shrinking state and local government sector and strangely in the temporary help industry.

Normally during the holiday shopping season you would expect strong increases in the usage of temps but that didn’t seem to be the case. But the biggest news was the decline in the unemployment rate to its lowest level in nearly three years. It was expected to rise and the continued drop is good news. Some may argue that the downward movement is being driven by a shrinking labor force. Ideally, you want the rate to decline as more people seek work but a much larger number of people find work.

However, the length of the slow recovery is forcing more and more people off the unemployment rolls. They are part of the labor force when they get unemployment compensation but after nearly two years of not finding work, a lot of people simply give up. In essence, they were bloating the labor force while collecting unemployment and now the labor force is better reflecting job search decisions.

Another positive element of the report was a rise in hours worked and hourly wages. That bodes well for income growth, which has to accelerate if demand and economic activity is to pick up steam.

MARKETS AND FED POLICY IMPLICATIONS: This was a better than expected report in all ways: There were more jobs created than most economists thought while the unemployment rate fell instead of the predicted rise.

Unfortunately, we need more like 300,000 jobs to get the unemployment rate coming down consistently and rapidly and that is not likely to happen this year. Also, firms need to grow wages faster if consumption is to accelerate. There is not a lot of appetite to give raises.

So while this is a good report, we need more of them and they need to get a lot better if the economy is to start expanding strongly. Nevertheless, this is another in the long line of positive indications that the economy is starting to come back. Investors should embrace this report but with Iran making threats and Europe a constant worry, who knows where the markets will go.

# # #

RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.

Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.

RE/MAX Connection Realtors, 1000 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com.

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Naroff Economic Advisors 2012 Outlook

Posted on January 5, 2012 by Elizabeth DiRiego

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

The Outlook for 2012

In a Nutshell: “The economy looks to be better in 2012 but we still have to get over the European debt hurdle first.”

What an amazing year. It started out positively as businesses were hiring again, confidence increased and growth seemed poised to change gears. But then gasoline prices broke the critical $4.00 a gallon level and consumers got worried. There was also a divisive debate over the debt ceiling, a downgrade of the U.S. debt, huge market volatility, a devastating tsunami which cut the Japanese supply chain and the European sovereign debt crises. When you come to think about it, the continued growth of the U.S. economy is amazing and shows just how resilient it is.

The economy ended 2011 on a high note. If economic activity is to accelerate, the consumer has to re-engage and that is happening. While growth during the summer was disappointing, households are spending money again. Whether it was Black Friday weekend, Cyber Monday or any other major sales event, the comparisons with 2010 numbers were really good.

Not only were people hitting the malls and wearing out the internet, they were also revisiting the dealerships as vehicle sales picked up. In other words, the long lost consumer is blowing the dust out of the wallet and opening it up.

While economic momentum was building entering 2012, that doesn’t mean strong growth is a given. The current restraints of a soft housing market, fiscal austerity, limited credit and a dysfunctional Washington will not disappear soon. And of course the election campaign can only create more disgust about our elected representatives.

But the real concern is Europe. Greece is bankrupt and other countries are having difficulty meeting their responsibilities. The European monetary union must also become a fiscal grouping but herding the cats is difficult. Not many nations want to give up some of their budgeting freedom even though that is necessary if the Euro is to survive.

Undoubtedly, budget cuts and tax increases will occur throughout Europe and that means the continent is likely to go into recession, if it isn’t already. That will reduce our exports as almost twenty percent of our foreign sales go to that part of the world.

The expectation is that the European Union will manage to do enough to get by even if they don’t do all that is needed. That should prevent a financial crisis. If that is the case, though the impact on the U.S. growth will be felt, it will not be large enough to drive us back into recession.

I am optimistic about 2012 and my forecast reflects that. As long as Congress passes the payroll tax extension, growing consumer spending should cause hiring to rise and by mid-year we could be seeing solid, though maybe not spectacular job gains. That would cause the unemployment rate to decline and by year’s end could drop below 8%. That is way too high but the downward trend would be clear enough that job insecurity would fade and confidence would improve. That would further increase household spending and convince businesses to continue investing heavily.

The growing pace of consumption and capital spending should be supported by the low interest rate policy of the Federal Reserve. While tight credit and restrictive standards may be limiting lending, many households and businesses have refinanced and that is adding to cash flow and bolstering balance sheets. Simply put, firms and individuals will have the money to spend and they are likely to do that.

While there is tremendous uncertainty about the outlook, the pattern of better than expected economic reports clearly points to an economy on the rise. Until housing starts to pick up steam and it is a lot easier to get a loan, don’t expect robust growth to return. But barring a major European meltdown, 2012 should be quite a bit better than 2011.

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RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.

Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.

RE/MAX Connection Realtors, 1000 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com.

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November Pending Home Sales/Weekly Unemployment Claims

Posted on December 29, 2011 by Elizabeth DiRiego

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: November Pending Home Sales/Weekly Unemployment Claims
KEY DATA: Pending Sales: +7.3%/Weekly Claims: 381,000 (up 15,000)
IN A NUTSHELL: “Most housing reports are looking up but prices are still in the dumps.”

WHAT IT MEANS: It is hard to get really strong growth if home construction remains weak, so any good news about that sector should be trumpeted. So here is today’s blast: Housing sales are beginning to climb. The National Association of Realtors reported that pending home sales, which are contract signings, jumped in November to the highest level since April 2010. Since that was when the government’s “first time, long time” buyers’ incentives were in place, it looks like we are now in the midst of a real, not policy-hyped recovery. Improvement was seen in all regions with the West and Northeast leading the way.
In a separate report, unemployment claims jumped last week. That was expected though the rise was somewhat more that predicted. Still, the trend is down as the four week moving average fell fairly sharply. It is now at a level that tends to signal declining unemployment rates.

MARKETS AND FED POLICY IMPLICATIONS: Most housing data have been coming in better than expected and that is an indication that the log jam is beginning to break. The jump in pending home sales should lead to a further rise in sales over the next few months. With affordability at a record high, if we can only make it a little easier to get a mortgage we just might see the sector show some real strength. Unfortunately, the huge number of distressed houses overhanging the market will continue to put downward pressure on prices and limit the uptick in home construction. Still, this report adds to the belief that the weakest link in the economy, housing, is starting to come out of it.

Next week is a big one as we get the December jobs report on Friday. While the rise in the claims number is a warning that the labor market is still not strong, there are real hopes the payroll numbers will be quite solid. The bigger question is the unemployment rate, which gapped down in November. A modest rise, which is expected, would be a positive sign that conditions are firming and that seems to be the message coming from the claims numbers. So we are ending the year on an up note and I want to wish everyone a

HAPPY NEW YEAR
Re/Max Connection Realtors disclaimer:
Re/Max Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. Re/Max Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
Re/Max Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

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November New Home Sales

Posted on December 27, 2011 by Elizabeth DiRiego

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: November New Home Sales
KEY DATA: Sales: 315,000 (up 1.6%); Nov ’10-Nov ‘11: +9.8%

IN A NUTSHELL: “The choices may be limited but the sale of new homes is moving up anyway.”

WHAT IT MEANS: After falling apart in the summer of our discontented Congress, new home sales have been on a steady upward climb. The November pace was just about at its highest level this year. The October number was revised upward and if that happens with November, we could see the rate break that high. Still, the level is ridiculously low and is about one-quarter the pace hit at the peak of the boom. The current sales pace needs to more than double before we can say that demand is decent. With so many distressed homes on the market, developers are “building down”, constructing smaller homes so the price continues to fall. At the same time, though, the supply is being kept under control. Indeed, the number of homes for sale hit the lowest level in the forty nine year history of the data.

MARKETS AND FED POLICY IMPLICATIONS: The recovery in the housing market is under way but it is also glacial. There is not much hope for the new construction segment of the market as long as the overhang of distressed homes remains so high. Still, up is better than down and the remaining builders are probably seeing better sales, at least compared to last year. In any event, it’s time to do some food shopping for the weekend so let me say to all:
Happy Holidays
Re/Max Connection Realtors disclaimer:
Re/Max Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. Re/Max Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
Re/Max Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

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November Existing Home Sales

Posted on December 22, 2011 by Elizabeth DiRiego

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: November Existing Home Sales
KEY DATA: Sales: +4.0%; Year-over-Year: 12.2%; Prices (Nov ’10-Nov ‘11): -3.5%;

IN A NUTSHELL: “It turns out the housing collapse was greater than thought but at least the process of digging out from the deep hole is beginning.”

WHAT IT MEANS: The housing market is healing, albeit slowly. Starts are improving and now we see that existing home sales are on the rise. Demand rose solidly in November led by a jump in single-family activity. Condo purchases were flat. The gains were across the nation though there was nearly a double-digit rise in the Northeast. So far in 2011, total sales are running almost two percent above the 2010 level. The increases were pretty evenly distributed between the single-family and condo markets. That said, the level of demand is unbelievably low. The National Association of Realtors revised the data for the period 2007 through 2010 and reduced total sales by over 14% or by about three million fewer sales. In other words, the meteor that cratered the housing market was a lot larger than initially estimated. And you thought the dinosaurs had problems. The reduction is in synch with the larger decline in GDP during the recession that was reported by the Bureau of Economic Affairs. As for prices, they are continuing to slide and for the first eleven months of the year, the median price has dropped nearly 5%, again with condos down a little more than single-family units.

MARKETS AND FED POLICY IMPLICATIONS: While some may concentrate on the huge downward revision to sales, the real story is the current trend in housing demand and that seems to be up a little. When you look at growth, it is the change in activity not the level of activity. Sales bottomed in July and have been moving up fairly steadily since. Unfortunately, the large number of distressed homes being purchased is reducing not only sales but supply as well. People with well-maintained homes know they cannot get their desired price, even if buyers are willing to pay it, as long as distressed homes are used as comps. It looks like these “normal” homeowners are simply keeping their houses off the market and that is reducing the number of homes for sale. That makes the supply of homes number somewhat useless as it implies that once conditions turn around, the ‘for sale’ signs will pop up like crazy. The latent supply is there, the actual supply is not. Regardless, this is another positive report that should make it clear that the economy is heading into 2012 with growing momentum. Unless Europe crashes and burns, and never underestimate the ability of politicians in any part of the world to do the wrong thing, growth in the U.S. next year could be decent. That is my forecast and I am sticking to it, at least for now.
Re/Max Connection Realtors disclaimer:
Re/Max Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. Re/Max Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
Re/Max Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

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November Housing Starts and Permits

Posted on December 21, 2011 by Elizabeth DiRiego

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: November Housing Starts and Permits
KEY DATA: Starts: +9.3%; 1-Family: +2.3%; Multi-Family: +25.3; Permits: +5.7%; 1-Family: +1.6%; Multi-Family: +13.9%

IN A NUTSHELL: “The slow process of getting back to normal seems to be underway as home construction is picking up some steam.”

WHAT IT MEANS: A major constraint to better economic strength has been the weak housing market. With so many distress homes on the market it is difficult for builders to compete. That reality still exists and is likely to continue that way for quite some time which means the pathway from disaster to health will be slow. But finally, it appears that the process of healing is underway. Housing starts jumped in November led by a huge increase in multi-family activity. With so many people out of the market and mortgages hard to get, a growing number of households are looking to rent so this segment of the market should remain strong. But there is also a steady upward trend in single-family construction as well. Looking across the nation, there was a huge increase in the Northeast that looks to be a bit overestimated. That could mean some reduction in December. Starts in the West were robust as well, they were up moderately in the South but down sharply in the Midwest. Looking outward, permit requests continue to rise and that means better construction in the months ahead. Builders are not requesting permits unless they intend to use them and the number of units authorized but not started keeps going down. We have begun to see that as the number of units under construction has increased.

MARKETS AND FED POLICY IMPLICATIONS: This was a surprisingly strong report continuing the trend of better than expected numbers. Home construction needs to improve if job growth is to pick up and that seems to be the case. While it may take two more years to return to decent levels of construction, the improvement over the next few years will add moderately to growth. But more importantly, it is estimated that an additional 100,000 starts will add roughly 250,000 new jobs and we are likely to see that increase in 2012. That bodes well for employment growth. Since these tend to be well paid positions, income growth should be bolstered as well. Thus, investors should take heart that if Europe doesn’t melt down and Congress figures out how to extend the payroll tax, the economy can continue to gain momentum. Indeed, if Europe was not such an unknown, the markets would be looking toward next year with some optimism instead the uncertainty now being felt.

Re/Max Connection Realtors disclaimer:
Re/Max Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. Re/Max Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
Re/Max Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

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November Employment Situation

Posted on December 8, 2011 by Elizabeth DiRiego

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: November Employment Situation
KEY DATA: Payrolls: 120,000; Private Sector: 140,000; Unemployment Rate: 8.6% (down 0.4 percentage point)

IN A NUTSHELL: “It was nice to see the unemployment rate come down but if we are to see it continue to fall, firms will have to hire a lot more people than they did in November.”

WHAT IT MEANS: The November employment report was another of those good news/bad news releases. On the positive side, the unemployment rate fell sharply to its lowest level since March 2009. That was the teeth of the recession and the rate was racing upwards. Unfortunately, some of the decline came from a large drop in the labor force and that is not a sign of growing confidence that jobs are available. That said, the labor force numbers are fairly volatile so I will withhold judgment. Regardless, this large a decline in the unemployment rate is usually not sustainable unless job gains are being added robustly and that just is not the case. Hiring remains less than hoped for and as usual it was restrained by continued cut backs in the public sector. The construction sector is still shrinking though there have been other indications that activity has improved. Weakness in nondurable goods manufacturing almost completely offset increases in durable goods hiring. We did see the retail, finance, insurance, temporary help, education, health care and restaurant sectors add workers. So far this year, the private sector has added about 1.7 million new positions while the public sector has cut about 260,000 jobs. Earnings were down a touch and that does not bode well for income growth.

MARKETS AND FED POLICY IMPLICATIONS: Private sector additions to payrolls were better than initial expectations but not nearly enough to keep the unemployment rate from continuously declining. Indeed, I would not be surprised if the rate ticks up next month. But I don’t want to be the Grinch that stole the employment report as there is little doubt that the sharp drop in the unemployment rate will be the biggest news in the media. That should lead to some firming in confidence. Also, the solid Black Friday and Cyber Monday sales numbers, combined with improving vehicle sales point to consumers slowly opening their wallets. That is the signal businesses need to start ramping up hiring. Actually, that could be happening already and the data are simply not keeping up. Both the August and September job gain numbers were revised upward by about 100,000 from the original estimates. Over the past three months, the private sector has added an average of about 160,000 workers and that is likely to be revised upward as well. While that pace is not great, it is much better than is commonly perceived. It is also in hailing distance of the rate needed to keep the unemployment rate coming down fairly consistently. But we are not there yet and it will require continued consumer spending and clearing the European financial and coming economic disaster hurdle before that does occur. All said, this is a good report that holds out hope for better things to come but not so great that anyone should think the labor market is healthy and all is well with the world.

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