Economic Conditions Continue to Improve

The next edition of the Economic Trends Monthly report has been released. The report can be found here: Economic Trends Monthly March 2012. Along with the economic indicators, the report contains new charts on how the employment of Hispanics and others have rebounded during the recovery. Additionally, there is information on the age distribution of the population across the country. There is some interesting stuff in there that is worth a look.

Regarding the economy, to be honest, there is really not much that stands out this month. The recovery continues at a fairly steady pace. Within the major Texas metropolitan economies, as well as the Texas and U.S. economies, moderate improvements continue as the overall economies continue to grow with steady, if unremarkable, employment growth and declines in unemployment. I think we may see some improvements in growth rates over the year, but it is not going to be a rapid acceleration. As I have mentioned before, it seems that one of the key brakes on growth is just the uncertainty in the economy.

One of the leading sources is the political and policy uncertainty in the economy, but this is not likely to be resolved until after the Presidential election. There are also still serious concerns in the EU, especially with 25% unemployment in Spain, but fear of an EU-wide contagion taking the entire EU into recession and then dragging the U.S. economy down with it seems to have abated a bit. On the upside, Germany’s economy is especially strong. The lack of lending to small and medium-sized businesses, due to both demand and supply-side factors driven in part by the uncertainty in the economy, is also a continued check on growth. This is not a very encouraging environment for business investment, as shown in the GDP figures.

Employment growth in San Antonio continued to accelerate a bit in March at 1.49% compared to the same month last year. The growth was broad-based across most sectors with only government, information (not information technology), and business and professional services showing declines in the month. This is similar to the pattern across the other major metropolitan economies in the state. I expect that business and professional services employment will turn positive once economic activity accelerates to a more robust rate. This means we should see growth in this sector before we do in the government and information sectors.

The government sectors are likely to continue to feel the financial squeeze from the recession for another year or two, and in fact, the decline in government consumption expenditures, especially at the state and local levels, is a big reason why growth is somewhat subdued. The information sector (e.g., newspapers and other media) is experiencing fundamental structural changes driven by rapid technology advances, which means the declines in this sector extend beyond the business cycle. I suspect it is going to take the information sector a while to fully adapt to these changes.

It might be a similar refrain that the economy is not growing as fast we would all like, but economic conditions continue to improve.