Comerica Economic Weekly

Economic data at the start of November are generally favorable. Hurricane Sandy delivered a devastating blow to coastal communities from Virginia through Connecticut. Damage totals could reach $50 billion, making it the second most costly storm in history, after Hurricane Katrina.  Effects of the storm are visible in this week’s data, in the form of reduced vehicle sales for October. Employment numbers for October were not impacted by the storm. The employment data for November will be collected in the week of Monday, November 12, so there may be some lingering disruptions to small coastal businesses, but there will likely be only a small visible drag.  Generally, there is a GDP bounce after a large storm due to rebuilding efforts. Construction activity will increase. However, there is no doubt that some coastal communities will suffer lingering after-effects from severe storm damage. Business and consumer loans eased at the end of October. Credit card activity dipped but will likely rebound in early November.  The October jobs report was favorable. However, the divergence between the payroll employment survey and the unemployment rate continued. The payroll survey added a moderate 171,000 jobs, beating consensus expectations. Despite the improvement in the payroll numbers, the unemployment rate ticked up to 7.9 percent, reflecting a large gain in the civilian labor force. The October jobs report will be viewed as a positive because it confirms that job creation has stepped up, at least temporarily, from the summer lull. Payroll gains were distributed across a broad range of industries. Manufacturing employment increased by 13,000 jobs after declining through August and September. Construction employment increased by 17,000 jobs, the biggest monthly increase since last January. Government employment declined by 13,000 after increasing for three consecutive months. The average workweek was unchanged at a moderate 34.4 hours for the fourth consecutive month. Average hourly earnings edged down slightly for the month. The combination of steady hours plus slightly lower average wages mutes the boost to income from the October job gains. Vehicle sales fell in October to a 14.2 million unit rate. The eventual completion of sales delayed by the storm, plus the replacement of damaged vehicles will be a boost in coming months. The ISM Manufacturing Index for October increased slightly to 51.7 percent, indicating improving conditions for U.S. manufacturers. This was the second straight above-50 reading since the summer slump. Anecdotal comments were mixed, with most industries reporting concern about possible negative factors. Construction spending gained 0.6 percent in September, as private residential activity accelerated.

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