Mar. 7, 2012
The U.S. economy, very weak during the first three quarters of 2011, picked up to an annualized growth rate of 2.8% in the fourth quarter.
That’s kind of a minimum of what we need to create the 200,000-plus new jobs per month necessary to keep up with our population growth. Let’s hope the economy continues to expand and fill the hole of the past four years.
The Manufacturing and Services Indexes from the Institute of Supply Management continued to increase, with the services index jumping to 56.8, the strongest in nearly a year. The Industrial Production Index has been increasing more slowly, but capacity utilization has been moving steadily up to levels near the highs of 2005-2007. Factory orders have been increasing at a very rapid rate, with orders for durable goods up 16.9% in 12 months. After the near-collapse in 2008-2009, the value of orders is closing in on the pre-recession highs.
Housing and construction remain the weakest parts of the national economy, with total dollars spent on construction continuing near 10-year lows, but showing tentative signs of turning up. Building permits and housing starts for private homes hit bottom nearly three years ago and haven’t moved. Those naturally go hand in hand with new-home sales, which haven’t improved on a national scale.
Most recessions are followed by housing booms, which increase the number of jobs and help pull us out of the recession. Not this time, because housing and mortgages in particular helped bring on the recession. Our national economy has been held down because of not having that boost.
The nationwide job market is looking stronger, with 243,000 net new jobs added in January and the unemployment rate down to 8.3%. Initial claims for unemployment insurance filed by those losing jobs have steadily fallen, with the January average at 376,000 per week. That number needs to get down near 300,000 for employment to really increase.
Looking at the very real dark side of the job situation, the total number of jobs in our national economy is now about where it was in 2000, even though our population has grown. The number of people not in the workforce in 2000 was near 70,000; it’s now near 90,000.
The U.S. dollar remains relatively strong, thanks to the big problems with debt in southern European countries and uncertainty about the Eurozone holding together. If not, major bank losses will result.
Financial markets around the world have been reacting badly to the numerous and widespread uncertainties, which has helped push the price of gold to heights only imagined only a few years ago and keep it there.
Existing home sales are finally out of the influence of last year’s government stimulus program and are looking pretty good. The Case-Schiller 20-City Index shows prices down 3.7% in the past 12 months (through November). We continue to hope that we’re reaching a point where things are as bad as they will get and from there they will improve. Washington D.C. looks a lot more hopeful than Atlanta right now. Mortgage rates are amazingly low, so there are opportunities out there.
Statewide and locally, Texas generally and Austin in particular are experiencing considerably better conditions than the nation as a whole with regard to the level of unemployment, job growth, home prices, housing inventory, and overall conditions. For this, we are truly grateful.
However, this did not come without a price, which was paid back in the early 2000s. Texas and particularly Austin suffered a lot then in the dot-com bust. We experienced a very weak economy, weak home sales, and lowered home prices for four years while much of the rest of the country was booming.
In other words, we paid the bill early by not having a boom. Now we’re not having as bad a bust. With 6.3% unemployment in Austin and 7.8% statewide, we’re attracting people from all over the country, which is strengthening our economy and real estate markets a great deal.