Read the original article from ArizonaEconomy.com, a product of Elliott D. Pollack & Company, here.

A quick analysis of important economic data released over the last week

Last week’s most interesting story was related to employment. In August, the labor market continued to dig out of the hole that the pandemic-related shutdowns put us in. Payroll employment increased in line with expectations. There were 1.4 million net new jobs in August. While this was down from 1.7 million net new jobs in July it was still a good number. So far, about 48% of the jobs lost have been recovered. In addition, the unemployment rate fell from 10.2% in July to 8.4% in August. About 344,000 of the new jobs were U.S. Census workers working for the federal government. If you add those to discouraged workers and those working part time for economic reasons, the unemployment rate jumps up. We still have a way to go to get back to healthy.

But, it is still good news. We need more people working. And the fact that we created so many jobs given the lack of support from a disingenuous Congress that went home to “relax” while millions of Americans are wondering how they will pay for rent because of government imposed shutdowns is a positive. In addition, hourly earnings continue to rise. Hourly earnings rose 0.4% in August over July and now are up 4.7% over last year. The gain is at least in part due to the fact that so many low-wage jobs were lost in the pandemic (think restaurant staff, bar tenders, hotel workers, social workers, flight attendants, etc.).

A lot of work remains to get the labor market back to what can be called healthy. The pace of recovery will probably slow in the next few months as we continue to have ups and downs in the containment of the virus until we get a viable vaccine and some agreement on therapeutics. Even when this occurs, it will take a while for things to open up again. Still, unless something unanticipated occurs, the path should be upward going forward.

In other economic news, initial claims for unemployment insurance fell only a little. The ISM’s manufacturing index rose modestly while the non-manufacturing index declined modestly. They both point to an expanding economy though. Manufacturers’ new orders continued to rise on a monthly basis but are still below a year ago. Construction spending was about flat. Mortgage applications fell a little mainly due to a drop in the refinance index. And in Arizona, initial unemployment claims rose for the fourth consecutive week.

Also worth mentioning was the CDC’s actions taken to prevent evictions of those who cannot pay all or part of their rent because of COVID and the economic impacts of it. To quote Rodney Johnson of H.S. Dent and Co, “The move doesn’t forgive the rent, it simply puts off the payments until January, at which time renters are supposed to work out terms with their landlords for paying back rent. Landlords are free to pile on charges and interest. Landlords must still pay the mortgage and other expenses related to their properties or face foreclosure and fees themselves. As for the rental payment that debt accumulates, it will become consumer debt, like credit card debt, in January.” Well put.

We’ve been talking about rent moratoriums for six months. Does the government still think that renters and others on credit card or auto loan forbearance are magically going to find a pile of money that will make things OK when these payments finally reach their deadlines? Those who have been left hanging by Congress will find it will take a long time to work things out. And what happens to those “evil” landlords, who, like any other business owner, expect to be paid for the product or service they provide? Isn’t that what investments are supposed to do? Another raw deal for the private sector at the hands of the government. By the way, most landlords are simply a Mom and Pop who put together enough money during their working career to buy a second home to rent or to buy a small apartment building that will allow their money to work for them.

U.S. Snapshot:

  • Initial claims for unemployment insurance declined modestly from the prior week.  However, the decline in initial filings could be an artifact of a change made to the seasonal adjustment process.  Going forward, the outlook is dependent on how quickly the federal government injects another round of fiscal stimulus and how much they decide to inject.  It is also dependent on how quickly a viable vaccine and agreed upon therapeutics come to market.  Initial claims remain more than 300% above year earlier levels and so far, account for more than 39% of the March payroll employment level. As for the employment situation, please see the commentary at the top of this week’s MMQ.
  • The ISM’s manufacturing index rose to 56.0 in August.  That’s up from 54.2 in July and 48.8 a year ago.  Any reading above 50 indicates that the sector is growing.
  • On the other hand, the services PMI index (formerly the non-manufacturing index) fell slightly to 56.9 in August.  That’s down from 58.1 in July.  A year ago, the index stood at 56.0.  As above, any reading above 50 suggests that the sector is expanding.
  • New orders for manufactured goods rose 6.4% in July compared to June.  But they are still down 6.2% from a year ago.
  • Construction spending was about flat when compared to both a year ago and a month ago. The private sector was down from a year ago while the government sector was up.

Arizona Snapshot:

  • Initial claims for unemployment insurance rose to 13,525 last week.  That’s up from 12,487 the previous week.  The number of initial claims has now risen in the state for four straight weeks and now stands 273% above year earlier levels.  The total filings since the initial closing of the economy in March accounts for 29.8% of March employment.

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