June 2, 2014
Lots to cover this week – an interesting quote, data from the macro to the county level is explored and some noteworthy news at the conclusion of this week’s commentary. Let’s get right to it.
Last week, I came across a great expression to describe the “recovery” – the Muddle Through Economy (courtesy of John Mauldin). Borrowing from Mauldin’s Thoughts from the Frontline, “A Bubble in Complacency” (May 25, 2014), I found the following passage to reflect my sentiments (which I have tried to articulate in this commentary over the past two years plus) and the passage does an infinitely better job articulating the same:
The simple fact is that we are in what I call a Muddle Through Economy. Things aren’t terrible, but they are not great, either. We’ve come through a devastating Great Recession caused by a crisis in the financial sector. It is quite typical for the effects of such a crisis to linger for a decade or more. So compared to where we were at the bottom of the Great Recession, the glass is half-full. But compared to the expectations we have for economic recovery and the resumption of vibrant growth, half-full seems like an exaggeration. And for many people, the glass is simply empty, while for others it is spilling over. (Emphasis supplied)
Over the past two years, this commentary has taken a long, circuitous route to make the above point by highlighting for you, the reader, detailed data to identify municipalities doing better or worse and to try and distinguish the reality that the details and underlying data matter despite the screaming headlines from the mainstream media that “All is Well.” So, as opposed to closing with the message that the details do matter, I open with that familiar refrain and encourage you to read on as the data explored herein drives home the point.
GDP Has Me Worried While Others Blame the Weather
The data focus this week is going to start at the macro level with GDP. The Commerce Department reported that GDP for the first quarter fell at annual pace of 1% (that means for the quarter it declined). While some blame the decline (which just last month was estimated to show growth) on the weather, others expectations are that this is indicative of a Muddle Through Economy – inconsistent and uneven growth. What concerns me is, if there is GDP growth, how anemic it will be – will we get to 2% growth? What are the implications of lower than expected growth on tax receipts and spending (business and consumer)? How can wages grow if the economy is barely moving forward? What downright worries me is the prospect of another recession (I am not predicting this) – recall that the technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s GDP.
Philly Fed’s Magic Ball
On Friday, the Philly Fed, courtesy of their crystal ball aka the Leading Index, released their view on growth prospects for the next six months – while not a prediction of GDP growth the Leading Index predicts the six-month growth of the Coincident Index. The average for the 50 States is 1.87% with a high of 5.59% (Rhode Island) and low of -.75% (Alabama).
Employment – Not the First Friday
It seems most people focus on the First Friday report and mainly ignore the more detailed data released by the BLS. It is why, as you prepare to get hit with the First Friday report this coming Friday, I offer some insight into the more granular data released by the BLS regarding employment for the month of April (you know, more definitive data beyond a snapshot survey).
Let’s start with some baseline and glass half-full data. For the period April 2013 to April 2014, we saw Job Growth in 2,103 counties (of the 3,215 for which data is reported). Mauldin’s comment above is, in many respects, reflected below. Growth is any color other than red or dark orange.
Staying with employment data, while there has been Job Growth in over 2,100 counties, I thought it worthwhile to peel the onion back a bit more and look at a combination of data points that I view as more indicative of improving employment conditions: Labor Force, Number of People Employed and Number of People Unemployed. Using the same timeframe (one year), I found that there were (only) 1,252 counties that saw an increase in their Labor Force, an increase in the number of Employed people and a decrease in the number of Unemployed people. Think back to that opening quote. I encourage Analytics subscribers to use the Filter module to go deeper.
In recent commentaries, I offered a perspective (concern) about Housing Prices being supported by a highly accommodative Fed policy. While I am not one who believes that (Fed policy) will change materially any time soon, I do not think low interest rates will drive Housing Price growth as we saw in years past (ultimately, people need more real income – that will be addressed in a coming commentary). Thus, while we are still seeing growth in the Housing Index as reported by the FHFA – 2,431 counties across 45 States saw their Housing Price Index increase between 1Q 2013 and 1Q 2014 – the pace of increase has not held up. I think it is worth watching this data point as Housing Prices drive Assessed Values (albeit on a lagged basis). This data can be accessed and tracked in the Analytics platform or via Data Services. Definitely worth looking at how those lofty budget projections measure against reality.
Texas and California – Drought Conditions
Under the category of last but not least (especially for those folks in the affected areas), the National Drought Mitigation Center released their updated data for May. The below map highlights those areas categorized as “Exceptional Drought” (red – those are the absolute extreme as the map legend makes clear) and “Extreme Drought” (dark orange). The implications of these conditions are important to contemplate for the people living in those areas as well as the economic impact associated with such severe conditions. Analytics subscribers might consider leveraging the Issuer profiles of the States or using the Data Access module to access, track and trend meaningful economic data.
New and Noteworthy
The DIVER Geo Score for the month of May will be released on June 3 and available to DIVER subscribers on June 2.
We are very pleased to announce that Mike Craft, formerly with Fidelity for 17 years, has joined the Lumesis team and will be our Managing Director, Credit. In the coming weeks and months, Mike will offer his insight via this commentary, will speak at conferences and work with our data and product development teams to continue to enhance the DIVER platform.
Gregg and Tim will be in Boston Tuesday to Thursday. Pete will be in New York, and Mark will be in Boston and New York.
Have a great week.
Gregg L. Bienstock Esq.
CEO & Co-Founder, Lumesis, Inc.
Data Released Last Week:
- Philly Fed Leading Index, State, Apr 2014
- Drought Intensity, County, May 2014
- Weekly Initial and Continued Jobless Claims, State, 05/17/2014
- Labor Force, Labor Force Change, County, Apr 2014
- Job Growth (1 Year),County, Apr 2014
- Unemployment(%), # of Unemployment, County, Apr 2014
- # of Employed, Employed as % Population, County, Apr 2014
- Housing Price Index, State, County, 2014 Q1
- House Price Change, State, 2013 Q1 – 2014 Q1
- House Price Change, State, 2009 Q1 – 2014 Q1
– See more at: https://staging2.lumesis.com/commentary-blog/2014-commentary/6-2-2014-gdp-and-growth-concerns-employment-details-and-concern-for-tx-and-ca#sthash.C4NVUiKV.dpuf