Labor Market Recovery Rates

Grubb & Ellis examined metropolitan areas with populations of 1 million or more to determine their labor market recovery rates – the percentage of jobs lost to the recession in each market that has been recovered through Nov. 2011. Six of the top 10 markets are in three adjacent states – the four big Texas metros (#2 Houston, #5 Austin, #6 San Antonio and #10 Dallas-Fort Worth) plus #3 New Orleans and #4 Oklahoma City. Energy is a big driver in this region as well as technology in Austin and ongoing reconstruction projects in New Orleans. The other four top markets are in the Northeast: #1 Pittsburgh and, in the 7th through 9th positions, Boston, Rochester, N.Y. and Washington, D.C. Education and healthcare are big drivers of growth in these metros plus energy in Pittsburgh and the public sector and related non-profits and consultants in Washington, D.C.

At the other extreme, Birmingham, Ala. has not recovered any jobs while the recovery rates in Cleveland and Atlanta are just 2 and 4 percent, respectively. The recovery rate in the U.S. overall is 28 percent. Look for continued, modest expansion in the labor market next year at roughly the same pace as 2011 – 125,000 net new payroll jobs per month. Metros with above average shares of energy, commodity, health care, education and technology businesses should grow more rapidly than average.

Monthly Job Change; Seasonally Adjusted

The gains were broad-based. Professional and business services led with 32,000 including 15,000 temporary positions, often viewed as a prelude to full-time hiring. Education and health services, always a stalwart, added 28,000. Leisure and hospitality gained 22,000 while retail trade increased by 17,800, a sign of retailer optimism as the holiday season approaches. Weekly hours worked was unchanged at 34.3, and average hourly earnings rose by a modest 0.2 percent. The household survey revealed that unemployment ticked lower from 9.1 to 9.0 percent...
Read More

Personal Income & Personal Consumption Expenditures

Consumer spending increased 0.6 percent in September, surprising in light of the meager 0.1 percent gain in personal income. As a result, the saving rate plunged to 3.6 percent, its lowest level since before the recession. This is the third consecutive month that spending has outpaced income. There are several reasons for this. Pent-up demand has been building, coaxing consumers to loosen up a little despite the abysmal consumer confidence readings....
Read More

Commercial Real Estate Vacancy Rates

All sectors of the property leasing market are recovering, some more quickly than others. Third quarter vacancy rates fell by 30 basis points for the office and apartment sectors and by 10 bps for the industrial and retail sectors. The apartment market has been recovering rapidly since mid-2010 thanks to the unresolved foreclosure crisis, tight mortgage lending standards and the tarnished reputation of homeownership.
Read More

Total Consumer Credit

After rising for 10 consecutive months, consumers took a breather in August as the amount of credit outstanding dipped by $9.5 billion or 0.4 percent, ending the month at $2.44 trillion. Consumer credit has two main components: nonrevolving credit, which includes loans for automobiles, mobile homes, education and a few other categories, and revolving credit, primarily credit card loans. Nonrevolving credit, which accounts for slightly over two-thirds of the total, had expanded for 14 consecutive months before August. Revolving loan balances hit a fresh cyclical low in August as households and lenders continue to exercise caution in using and extending credit, respectively.
Read More

Personal Income & Personal Consumption Expenditures

Personal income has trended lower in recent months, which has kept a lid on spending according to a report released last week by the U.S. Bureau of Economic Analysis. Personal income fell 0.1 percent in August compared with July. Wage income, an important component of personal income, fell 0.2 percent, not surprising in light of the weak labor market. Personal consumption expenditures managed a weak gain of 0.2 percent last month as consumers trimmed their savings rate in order to continue spending. Real (inflation-adjusted) expenditures were flat, however, as inflation rose 0.2 percent.
Read More

Consumer Confidence

Under normal circumstances, consumer confidence surveys are not very informative. They do not correlate well with consumer spending because consumers respond to what is going on rather than driving it. But in the “new normal,” consumer and business confidence appears to be playing an unusually large role in the recent bout of economic and financial market weakness. The S&P 500 plunged sharply during the first several trading days in August when the debt ceiling standoff was coming to a head, and it has been...
Read More

Retail Sales | Monthly % Change, Seasonally Adjusted

Retail sales were flat in August compared with July according to the Census Bureau even though many individual retailers had previously reported decent back-to-school sales numbers. Core retail sales, which exclude autos and gas, rose 0.1 percent. Hurricane Irene may have played a role, boosting sales at grocery and home improvement stores, which rose 0.3 and 0.2 percent, respectively, while depressing sales elsewhere. Year-over-year, total sales were up 7.2 percent while core sales increased 5.4 percent - healthy gains though a deceleration from July's performance.
Read More

10-year Treasury Yield, 2011

The yield on the 10-year Treasury note ended Friday at 1.93 percent, the lowest level since at least 1962 when the Treasury Department began publishing daily rates. The decline of approximately 150 basis points so far this year has been driven by fear that policymakers in Europe and the U.S. are unable to manage the overhang of sovereign debt, which threatens to destabilize the global banking system and tip the European and U.S. economies into recession. The bond market also is reacting to “Operation Twist,” the potential for the Federal Reserve to drive long-term rates even lower by selling shorter-term debt and using the proceeds to buy longer-term debt. Lower rates would encourage businesses to borrow and take on more risk, although the results are likely to be modest as long as business and consumer confidence remains depressed.
Read More

ISM Non-Manufacturing Index

The service sector continued to expand last month according to the Institute for Supply Management’s non-manufacturing index, which, at 53.3, remained above the break-even level of 50.

 Values > 50 = Expansion

The most forward-looking component of the index, new orders, was 52.8, a sign that production activity is likely to expand slowly in the near future. The employment sub-index registered 51.6, meaning that service businesses added jobs at a sluggish pace last month. At first glance this contradicts the employment situation report released on Friday by the Bureau of Labor Statistics, which showed zero net new jobs created last month. However, that report was skewed lower by the temporary loss of 45,000 striking Verizon workers. Several service-related sectors added jobs in August led by education and health services, up 34,000, and professional and business services, up 28,000. The potential for a recession has increased in recent weeks as consumer confidence has cratered, the fears of financial contagion from Europe have spread, and the manufacturing sector has decelerated. In this context, the ISM non-manufacturing index, which covers 80 percent of the economy, raises some hope that the economy can stave off a near-term recession.