Utah Labor Market Indicators - November (October) 2008

Source: Utah Dept of Workforce Services, 12/17/08

Employment Trends Top 15 Markets YTD October 2008

Source: Marcus & Millichap Research Services, BLS. 12/16/08

Utah Economic Snapshot - First Five Months FY2009 YTD

• International Business Confidence
• Global business confidence continues to slide, falling to another new record low last week. Sentiment is equally negative in North America, South America and Europe, and while Asian business confidence is not quite as dark, it is weakening rapidly. Hiring intentions plunged last week and are consistent with job losses of close to 500,000 per month in the U.S. Pricing pressures also collapsed, falling back to where they were in 2003, the last time deflation was a real concern. The entire global economy is mired in recession according to the business confidence survey results.

• International Shipping Rates Recover
• One of the world's key shipping markets has begun to recover from a slump, with a revival in Chinese demand for iron ore and coal pushing some average charter prices up almost threefold in the past week. The revival in prices, after a disastrous six months for the industry in which charter rates fell nearly 99 per cent for the largest vessels, could encourage shipowners to bring mothballed vessels back into service.

• Treasury International Capital Flows
• Reflecting the unprecedented crisis in international financial markets, the October TIC data are quite grim as they indicate much diminished foreign appetite for U.S. financial assets. Net foreign purchases of U.S. long-term securities in October dropped to only $1.5 billion from $65.4 billion the prior month. This is of course not enough to finance the monthly U.S. trade deficit that has been in the $56.5 to $58.8 billion range over the past three months. However, one dismal month does not a pattern make; we'll need to monitor future TIC flows to see if there has been a significant change in underlying trends.

• Current Account
• The U.S. current account deficit narrowed by 3.8% to $174.1 billion in the third quarter of 2008, narrower than the revised $180.9 billion second quarter deficit. The consensus expected the deficit to narrow to $178.8 billion. The deficit on goods narrowed to $214.7 billion, while the surplus on services widened to $38.2 billion.

• Consumer Price Index
• The consumer price index decreased 1.7% in November, exceeding expectations for a milder decline. The core index was unchanged over the month. Price declines were led by energy, but inflation broadly is moderating. With the U.S. in recession, this will be a significant weight on price growth for the near term

• FOMC Monetary Policy
• The Federal Open Market Committee lowered the fed funds target rate to a range from 0% to 0.25%; it was previously 1%. The fed funds rate is now at its lowest level ever. The committee's statement said that the "outlook for economic activity has weakened further" from the FOMC's previous meeting in late October. The statement says that the "Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability." The statement implies that the fed funds target rate will remain in that range for the time being. It also discusses specific actions that would move the Fed further toward quantitative easing.

• Industrial Production
• Industrial production fell 0.6% in November and manufacturing output fell 1.4%. Manufacturing received some support from the end of the Boeing strike, but continued weakness in housing and consumer-sensitive categories continued to dampen output. Manufacturing production is on track to fall close to 10% at an annual rate this quarter, considerably worse than the reading in the third quarter and the weakest performance since the early 1980s.

• Bankruptcy Filings
• With the recession in full swing, both business and personal bankruptcy filings grew rapidly in the third quarter. The number of personal filing remains low, however, still curtailed by reforms enacted in late 2005. Filings were 33% above last year, but remained more than 25% below the third quarter of 2004, before reform legislation and in a better credit environment. Business bankruptcies are high by any measure, with filings up 61% from last year and 52% over the past four years.

• New Residential Construction (C20)
• Conditions are bleak for homebuilders. Residential construction plunged again in November, with a nearly 19% m/m decline in total housing starts. At 625,000 annualized units, starts have descended to an unprecedented post-World War II low. Further, the Census Bureau revised downward October starts by 3%. Permit issuance was down sharply as well in November compared with October. Exceptionally weak demand for new homes is constraining homebuilding. Although this situation is difficult for homebuilders' bottom line, the reduction in residential construction will help clear the market of excess inventories.

• NAHB Housing Market Index
• The NAHB housing market index held steady in December, but remains at a record low. The housing market index stands at 9, the same as last month. Likewise, the traffic of prospective buyers remains unchanged at 7. However, both present single-family sales and expected single-family sales over the next six months fell. Present sales fell from 9 to 8, while expected sales fell from 18 to 16. Declines across all these indices have abated, suggesting that builders are soon expecting a bottom to the housing market.

• MBA Mortgage Applications Survey
• In the week ending December 12, the MBA composite market index increased 2.9% to close the week at 841.4. The increase in the refinance index was larger, gaining 6.5% to end at 4,156.0. The purchase index decreased 4.5% to 286.1. Both the market and refinance index are above year-ago levels.

• Chain Store Sales
• Chain store sales rose 0.6% in the week ending December 13. However, that did not match last year's growth, as sales were 0.4% below last year after two weeks of positive year-ago growth. The ICSC noted that consumers again appear to be delaying holiday shopping until late in the season.

• Oil and Gas Inventories
• Crude oil inventories rose by 500,000 barrels during the week ending December 12, according to the Energy Information Administration, in line with expectations. Gasoline inventories rose by 1.3 million barrels, also consistent with expectations. Distillate supplies rose by 2.9 million barrels, beating expectations of a 1.5 million barrel decline. Refinery operating capacity plummeted to 84.1% from 87.4%. Total domestic petroleum demand soared. This report points to higher oil prices.