Economic Update:  Good News All Around

04.30.2010

The area received good news on the Louisville Metro employment situation this week.   The Bureau of Labor Statistics announced that the unemployment rate for Louisville Metro declined from 12.2% to 10.7% for March.   The data are unseasonal and subject to revisions.  But given the magnitude of the decline, we should view this decline as favorable.

We saw a slight month over month decline in the labor force, but a larger decline in the number of unemployed.     This combination suggests that more workers are moving from unemployed to employed ranks.   On a year over year basis, the size of the labor force declined from last year and the number of employed are both down.  We can attribute this to the depths of the recession and the impact on labor markets.     But looking at the short-term and indications for the near term -term, this report should be viewed favorably.

Employment losses resumed the trend of year over year deceleration.  February had seen an increase, but the March numbers show that non-farm payroll losses continue to shrink on a year over year basis, producing the smallest year over year losses in 2009 and 2010.  Based on the current recovery and trend in employment, I continue to believe that the region will see positive year over year employment changes in the latter half of 2010. 

Manufacturing losses continue to decelerate, and we are seeing much smaller losses in transportation and utilities, recording the smallest year over year loss since 2008.   The rebound in national manufacturing and increasing consumer spending should bode well for the region’s transportation and logistics industries.

The professional and business services sector has now registered three consecutive monthly year over year increases.   Historically, increases in this sector are usually followed by year over year increases in total payrolls.   

GDP Update

The Bureau of Economic Analysis released advanced estimates for gross domestic product this morning.  According to the report, the nation’s economy grew at a rate of 3.2% from the previous quarter.   Unlike the two previous quarters that were driven by government stimulus or inventory adjustments, growth in the first quarter of 2010 was driven primarily by the consumer.  Consumer spending accounted for 2.55% points of the 3.2% growth.  The strongest growth in consumer spending occurred in durable goods, a favorable sign that the consumer is beginning to make larger purchases.     In a sign that consumers are now beginning to make more discretionary purchases, the durable goods growth was driven by recreational goods and vehicles.   The services component of consumer spending was also strong from the previous period.  

The strongest growth in the services component was attributed to food services and accommodations, another indication of stronger discretionary spending.    Building in both non-residential and residential structures was down from the previous period.   While this detracts from total GDP growth, the decline in building can only help clear existing inventories in both commercial and residential categories.

Source:   www.barrons.com

Suggestions

If you have any suggestions on future columns or research about specific industries or other economic data, please send me an email at udufrene@ius.edu.

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Uric Dufrene.

Uric Dufrene, Ph.D. holds the Sanders Chair in Business in theSchool of Business at Indiana University Southeast. He conducts research on local and regional economic trends, and teaches corporate finance at the undergraduate and graduate levels. He previously served as dean of the School of Business.