Analysis Roundup for August 29, 2012

NCLGBA will post a collection of topics discussed in economic reports of note from financial institutions and government agencies on a regular (not necessarily weekly) basis.  Here is what we’ve found recently:

Bureau of Economic Analysis
US GDP Growth Slows Down in 2nd Quarter to 1.7%

Today’s report on GDP performance for the 2nd Quarter of 2012, a benchmark for general direction of the overall national economy, reflected concerns expressed by economists of the past several months of a slowing condition. US Real GDP (indexed for inflation) grew at an annual rate of 1.7% for the last quarter. This is less than the 1.9% growth achieved in the 1st Quarter.

Economists predicted GDP growth would reside between 1.5% and 2%. This snipped from today’s BEA Press Release provides an explanation of the factors contributing to recent performance:

The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, nonresidential fixed  investment, and residential fixed investment that were partly offset by negative contributions from private inventory investment and from state and local government spending. Imports, which are a subtraction in the calculation of GDP,

AAA Carolinas/Gas Buddy
Late Summer Gas Price Spike Exacerbated by Hurricane Issac

Late spring and early summer saw a significant drop in crude oil, gasoline and diesel prices from winter and early spring highs, with prices falling about 30% between March and early July.

Unfortunately, fuel-oriented energy prices rebounded from mid-July through August, with gasoline prices increasing at a rate faster than crude and diesel because of the impact of high corn prices due to the use of Ethanol.

Now, anticipated supply disruptions created by the arrival of Hurricane Issac along the gulf coast of Louisiana and Texas is forcing additional price spikes. Today’s daily price report from AAA indicates that the national average increased 1.3% for regular unleaded compared to yesterday, with North Carolina metropolitan areas now at or close to the national average of $3.80/Gallon.

According to this comparative chart from Gas Buddy, North Carolina retail prices for regular unleaded have steadily returned upward to the national average in the second half of the summer.

While the neighboring state of South Carolina has seen price increases as well, they remain significantly below the national average. Over the long run, supply problems can force more localities to see prices move toward the national average, even with their traditional location “discount” and/or lower tax rates.

Source: AAA, 8/29/2012

Bureau of Labor Statistics
NC Metro Nonfarm Employment Falls, Overall Employment Rises for July

Toward the end of each month (or a week or so into the start of the next month), the Bureau of Labor Statistics (along with the North Carolina Department of Commerce Division of Employment Security, a.k.a. ESC) publish employment statistics for metropolitan areas (MSAs). For July, each of North Carolina’s 14 Metropolitan Areas saw an expected decline in nonfarm payroll, and indication of softening conditions this summer with some impact resulting from public sector contraction.

Overall, the State lost 75,200 nonfarm payroll positions in July, though overall employment for the month did increase by 12,900 compared to June as a result of seasonal hires in the agriculture sector. Nine MSAs in North Carolina also saw net job growth in July, with the biggest spike witnessed in the Raleigh-Cary MSA (+8,300).

All but 2 metropolitan areas in North Carolina (Wilmington and Winston-Salem) have seen positive growth in nonfarm payrolls compared to a year ago.

MSA unemployment rates for July range from a low of 7.7% (Asheville) and 7.9% (Raleigh) to a high of 13.1% (Rocky Mount). Eight MSAs had rates higher than the statewide rate of 9.8%.

Richmond Federal Reserve Bank
Nearly 17K Private Sector Jobs Gained in NC in June

The Richmond Fed produces a narrative “Regional Update” of employment conditions of each within their District on a monthly basis, providing additional perspective on monthly employment statistics distributed the third Friday of each month by the Bureau of Labor Statistics. Here is the text of their latest update from today on North Carolina’s job picture:

Labor market indicators for North Carolina were generally mixed in July, but the underlying employment data were encouraging. Private sector payrolls swelled even as the state’s unemployment rate rose. However, the results from our Carolinas Survey of Business Activity for July were disappointing, as more respondents reported that business activity had slowed and labor demand had softened.

North Carolina’s total payroll employment (seasonally adjusted) increased by 1,800 in July — its second monthly increase in a row. However, the relatively small gain in total payrolls belies a much bigger improvement in the private sector. Private sector firms added 16,600 net new jobs to payrolls and the gains were very widespread. Leisure and hospitality employment jumped by 5,900 in July, which reversed all of the losses that the industry had experienced in the first half of the year. In fact, employment in leisure and hospitality stood at its highest level since March 2008. Manufacturing also showed an impressive increase in July, rising by 3,400 jobs. Private education and health services jobs bounced back last month from a rare decline in June. The professional and business services and the other services categories also increased notably during July. The remaining major private sector industries saw more modest gains.

The big drag on North Carolina’s payroll employment during July was the public sector, especially local governments. After trending up between July 2011 and June 2012, local government employment dropped by 14,500 last month, accounting for all of the public sector job losses. State and federal government employment was largely unchanged. Over the year, private sector payrolls were up 42,500 in North Carolina, while government employment was off by 6,600 jobs.

Looking across North Carolina, the data varied widely. Eight of the state’s 14 metropolitan statistical areas (MSAs) showed month-to-month increases in employment, with the largest occurring in the Triangle area (the combination of the Raleigh and Durham MSAs). The Greensboro-High Point MSA was not far behind, with an increase in employment of 2,700 in July. Asheville, Burlington, Greenville, Jacksonville, and Rocky Mount experienced more modest increases. By contrast, the Charlotte MSA lost about 3,000 jobs during July and total employment in the area is off by 5,400 since April. The Winston-Salem MSA also experienced substantial jobs losses in July.

North Carolina’s unemployment rate, which is based on a different survey than the payroll employment estimates, increased for the first time in a year. After coming in at 9.4 percent for three straight months, the state’s seasonally adjusted unemployment rate increased 0.2 percentage point in July to 9.6 percent. The ranks of unemployed workers swelled by a little more than 5,300 workers, even as labor force participation in the Tar Heel state continued to move lower — a trend which started in March. Our Carolinas business activity index dropped into negative territory in July for the first time since last fall. Moreover, the deterioration in current general business conditions was accompanied by continued softness in current labor demand indicators.

Economic Reports Available for Charlotte & Raleigh Metro Areas

PNC, like other national banks, has an economics division that evaluates and provides research and analysis on national and global economic conditions. PNC also prepares quarterly economic updates on a regional basis for the markets they serve across the United States. A consolidated regional report includes link to metro area reports, including new ones they’ve added to cover their expanded markets in Charlotte and Raleigh as a result of their recent acquisition of RBC Bank.

Click Here for their most recent Regional Outlook

Click Here for their most recent Charlotte Market Outlook

Click Here for their most recent Raleigh Market Outlook

Click Here for their most recent National Economic Outlook Report (Monthly)

Replay information on their economic outlook conference call held August 23rd will be made available as soon as it is posted.

GDP Revisions show Less Improvement

GDP Revisions show Less Improvement

By Kenneth Hunter

NOTE: The following represents the analysis-based opinion of the author and do not reflect those of his employer or any other affiliations.

On July 29th, the Bureau of Economic Analysis (BEA) released its initial report on Gross Domestic Product (GDP) for the 2nd Quarter of 2011. Their findings showed that Real GDP (chained to factor inflation) increased at an annual rate of 1.3% during the second quarter, performance that was below expectations. Their findings also showed that Real GDP in the first quarter, earlier reported at more than 2% (annualized), was downgraded to 0.4%.

More significantly, the BEA revised its GDP data to match revisions to the national income and product accounts. These adjustments significantly altered Real GDP measurements from 2003 to the first quarter of 2011. As a result, the current measurement of Real GDP for the second quarter (annualized) of $13.23 Trillion is less than Real GDP in the second quarter 2008 ($13.31 Trillion), the last quarter prior to the economic collapse that exacerbated the recession that began in 2007 (see graph below).

The revision also shows that the impact of the recession was a 5.1% decline in GDP between the official start of the recession (second quarter, 2007), and its deepest point of decline (second quarter, 2009). Earlier reports showed an impact of about 4.1% decline.

Earlier this year, the BEA reported that Real GDP for the fourth quarter 2010 finally exceeded the level set in the second quarter of 2008.  While it is unlikely that this revision will change the formal timeframe for our most recent recession (2007-2009), it does better represent the realities still facing the economy and American people as they proceed with recovery.


1st Quarter GDP grows, but by how much?

The Economics Group of Wells Fargo Securities published the report linked below earlier this morning reviewing national gross domestic product (GDP) performance for the first quarter of 2010.

First Quarter 2010 GDP Summary – Economics Group, Wells Fargo Securities

Initial data was reported by the Bureau of Economic Analysis, an agency of the U.S. Department of Commerce.

Media reports often focus on a singular statistic or metric of overall performance that the reporting agency will direct attention to within the first paragraph or two of an executive summary. Hence, the initial response from traditional outlets is that First Quarter GDP grew at 3.2%, signifying four consecutive quarters of growth (technically brining an end in the eyes of economists to our recent/current recession).

However, this 3.2% calculation of GDP growth is based on numerous factors that are not easily explained. The Wells Fargo report did identify some quarterly growth in a key area of interest to local governments, final sales (1.6% compared to last year).  This should translate into higher sales tax revenues at the state or local level (with the exception of business lost to online sales or non-taxed markets).

Wells Fargo also examined the GDP Price Index, which indicates quarterly growth of less than 1%, indicating that inflation is relatively under control. However, aggregate measures of inflation are not universally applicable, especially at the consumer level when considering that individuals experience different needs with respect to fuel, energy, medical care and housing.

Based on the Chained Dollar Value of GDP (adjusted for inflation), here are some other observations:

  • Quarterly GDP growth for the 1st Quarter, compared to the 4th Quarter of 2009, was less than 1%
  • The total Chined value of GDP ($13.255 Trillion) is still less than this value at its height in the 2nd Quarter of 2008 ($13.415 Trillion)
  • Growth in personal consumption is leaning more toward goods (durable and nondurable) and less toward services
  • Private Domestic Investment grew 3.5% in the last quarter, and is up 7.7% compared to the 1st Quarter of 2009. However, due to the significance of the stock market and housing market collapses, this portion of GDP is still down 19.4% compared to pre-crash values in the 1st Quarter of 2008.
  • Government expenditures (chained, adjusted for inflation) actually declined 0.5% compared to the last quarter. Federal spending continued to climb (+0.3%), while state and local spending declined for the third consecutive quarter (-1%)
  • Overall personal consumer inflation for purposes of GDP over the past year (+2%) is slightly higher than inflation applicable to state and local government (+1.7%) – This is based on the price deflator measure promoted by Dr. David Ammons