National Economic Outlook - June 2015

Written By:
Ingo Winzer, President

Local Market Monitor

Good as government statisticians are, they can't make adjustments for the weather. That's what they'd like to do with the Gross Domestic Product numbers from the first quarter of this year, which say the economy was down 0.7 percent. It's clear that nasty weather was to blame rather than some fundamental deterioration. The negatives were from exports, construction, and people not buying big-ticket items - just what you might expect if ports are frozen and snow drifts are blocking your front door.

Statisticians would like to make adjustments to the various home prices indexes, which not so long ago were telling us that prices were up 20 percent in Phoenix and Sacramento, for example - 26 percent in Las Vegas. Now that the booms in those markets have subsided, it's clear that we were seeing speculation in foreclosed properties instead of a real rise in home values. Although real estate is America's biggest industry and largest personal asset, our ability to measure and understand it is pitiful - compared, say, to our knowledge of employment.

(I could go on and on about this - how the financial crash and recession were entirely due to our ignorance about real estate...)

The employment numbers show an economy that is doing very well, even if the GDP numbers don't. Jobs in May were up 2.2 percent from last year - in line with results from recent months - and unemployment held steady at 5.5 percent. Jobs were up 1.4 percent in manufacturing, 2.2 percent in retail trade, 3.6 percent in business services, 2.8 percent in healthcare, and 3.4 percent at restaurants. As always, these days, government jobs were flat.

Jobs in construction were up 5 percent and jobs in furniture manufacture were up 5 percent. These are small potatoes so far, just hinting at stronger demand, but a reviving home construction industry would be a powerful and long-lasting support for the economy.