Deller's two cents: From a national perspective, good economic news, the national economy is slowing picking up speed. But for Wisconsin, we seem to be moving in the wrong direction. From the Wisconsin State Journal today: "Wisconsin lost 3,900 private-sector jobs in December to mark the sixth straight month of losses, a report issued Thursday by the state Department of Workforce Development showed.Even worse, Wisconsin's job losses came while the nation added 212,000 jobs in December. Still, the state's unemployment rate dropped from 7.3 percent to 7.1 percent for the month...." As we have talked about before, looking at monthly ups and downs don't tell us much, but rather trends in those ups and downs. The fact that this is the sixth straight month of job losses points to a definitive trend. Now, what is driving this?
Economic Week in Review: Chugging along as inflation eases
January 20, 2012
The economy continues its modest forward pace, without stoking higher inflation. In fact, this week's data show price increases decelerating, easing fears for the moment that the Fed's accommodative monetary policies are sowing the seeds of high inflation down the road. For the week ended January 20, the S&P 500 Index rose 2.0% to 1,315.38 (for a year-to-date total return-including price change plus dividends-of about +4.7%). The yield on the 10-year U.S. Treasury note rose 16 basis points to 2.05% (for a year-to-date increase of 16 basis points).
Home sales show slow progress
As expected, existing-home sales continued their slow rebound, increasing 5.0% in December to an annualized 4.61 million units. Fourth-quarter sales overall were strong, and the market finished out the year with 3 consecutive months of gains, resulting in a final yearly increase for 2011 of 1.7%.
"The pattern of home sales in recent months demonstrates a market in recovery," said Lawrence Yun, chief economist at the National Association of Realtors. "Record low mortgage interest rates, job growth, and bargain home prices are giving more consumers the confidence they need to enter the market."
Total housing inventory dropped 9.2% to 2.38 million existing homes for sale, the lowest number since March 2005. That figure, representing a 6.2-month supply at the current sales pace, is down from a 7.2-month supply in November, reflecting the typical shrinkage of inventory in the winter. Home prices remain the major weak spot, with the median price declining 2.5% from its level at the end of 2010.
Homebuilding data are mixed
New residential construction projects in December were down 4.1% to 657,000 units (annualized). However, starts were up 24.9% over the past 12 months-continuing a trend of positive readings over the last 7 months. Multifamily-structure starts (including apartment buildings) pulled down the overall figure in the most recent report, but, on a brighter note, single-family starts, which make up a majority of housing starts and were hit hard by the housing downturn, increased by 4.4%, the best monthly gain since June. Total permits totaled 679,000, down slightly from November but 7.8% better than a year ago. In fact, year-ago comparisons have been trending positive for 8 straight months, indicating that single-family construction is finding its footing.
Industrial production bounces back
After falling in November, U.S. industrial output rose 0.4% in December, close to expectations and confirming the general trend of modest production expansion for 2011. Manufacturing output was strong, rising 0.9%. Elsewhere in the industrial arena, mining production rose 0.3%, but utilities' output declined 2.7% because of above-average winter temperatures.
Inflation keeps decelerating
Price reports continue to suggest that the threat of rising inflation has been dampened. For the third straight month, the widely watched Consumer Price Index (CPI) didn't rise. The "headline" inflation number came in unchanged for December, following an identical reading in November and a slight decline in October. The ongoing fall in energy prices continues to be the main brake on price changes. Food-price inflation stayed moderate, rising 0.2%. Core CPI, excluding energy and food, barely rose 0.1% as vehicle and apparel prices declined.
Further confirming the deceleration of prices, the Producer Price Index (PPI) retreated 0.1% in December, the second decline in 3 months. As with the CPI, energy price declines (-0.8%) were a big factor. Wholesale food prices also fell 0.8%. Looking at the annual pace of change, the CPI registered a 3.0% gain over 12 months-the slowest yearly pace since last March-while the PPI was up 4.8%, the lowest reading in nearly a year.
The economic week ahead
The Federal Reserve's policymaking committee will meet and issue an update on its monetary stance on Wednesday. New-home sales, durable-goods orders, and leading economic indicators will be updated Thursday. On Friday, the first reading of 4th-quarter gross domestic product will be announced.
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Steven C. Deller
Professor and Community Development Economist
Department of Agricultural and Applied Economics
515 Taylor Hall --- 427 Lorch Street
University of Wisconsin-Madison/Extension
Madison, WI 53706
608-263-6251
"I started out with nothing and I still have most of it left."
Seasick Steve The January 11th "Beige Book" which are reports from the various Federal Reserve Banks, suggest that the recovery is gaining strength. For example, "[t]he Ninth District (Minneapolis) economy grew at a modest pace since the last report." While "[t]he rate of growth of economic activity in the Seventh District (Chicago) picked up in late November and December." You can look at the full Beige Book at http://www.federalreserve.gov/fomc/beigebook/2012/20120111/fullreport20120111.pdf
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