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From The Morning Call -- November 4, 2005 How are we doing? Fine, thanks Lehigh Valley shows economic growth. Inflation a concern. Of The Morning Call The Lehigh Valley economy seems to be chugging along rather nicely, with steadily improving employment news and a robust housing market. ''What I'm looking at is an economy that has been growing,'' said Kamran Afshar, a Bethlehem economist and market researcher. One of the few negatives is inflation, which has been running at a brisk annual pace of more than 4 percent, according to the June reading of The Morning Call/Kamran Afshar Consumer Price Index. Normal inflation locally is 3 percent. New data for September inflation will come out later this week, and it's easy to predict that it worsened, with gasoline prices spiking to record highs that month. Of course, gas prices have receded quickly since hitting a record high of $3.23 per gallon. Last week, prices were running much lower, at $2.39, according to AAA's Daily Fuel Gauge Report. The inflation-fighting Federal Reserve last week raised short-term interest rates for the 12th time since June 2004 with a wary eye toward inflation on the national level. The prime lending rate, the basis for many consumer loans, moved up in lock-step, to 7 percent. Working for a living Last week, the Pennsylvania labor department said the September unemployment rate in the Lehigh Valley was 4.6 percent, which is low by historical standards. The rate has been below 5 percent for seven out of nine months this year. Economists generally agree 5 percent is full employment, meaning anyone who wants a job can get one. It helps that fewer people are losing jobs. In September, layoffs hit a record low, as measured by initial unemployment claims. Claims totaled 2,611. No month has dipped below 3,000 claims since at least 1996, the earliest that comparable data is available. The number is so low, it may be a one-month anomaly. Even so, the downward trend in layoffs this year is clear. It also helps that the region is adding jobs at a healthy pace. In September, the Lehigh Valley had 3,500 more jobs than the year before. The region has steadily added jobs for two straight years, according to job figures using a 12-month average, which smooths month-to-month variations to show a clearer trend. The total number of jobs, 334,600, continues to lag the number of employed workers, 393,400, suggesting many Lehigh Valley residents commute to jobs outside the region. And finally, wages seems to be gaining upward momentum. For a while, jobs were available but job hunters complained positions were mostly service jobs with mediocre pay and benefits. Job experts report anecdotally that pay is rising. And the labor department numbers show factory wages are steadily increasing, reaching $15.15 an hour in September, up 9 cents from the month before and up 37 cents from the year before. And average hours worked pushed over 40, suggesting some manufacturers were paying overtime wages. Home sweet home The shining star of the economy has been the housing market, at least from a homeowner's point of view. September sale prices pulled back from the record highs seen during the prime summer selling season, but still remained lofty. The average price of houses sold in September dipped to $214,000 from a record $228,000 the month before, but it was the fourth-straight month the average surpassed $200,000. So far this year, the average home has appreciated $31,000 or $3,444 a month. Even if consumers didn't sell a home at sky-high prices, the equity in the home they have rises with escalating prices. That means they can eliminate private mortgage insurance earlier and tap the the increased value of their homes with home-equity loans and lines of credit. New-home prices receded in September from the nearly half a million dollars in August, a record high. The average newly constructed house cost $383,000. Newly issued home-building permits in September were up 12 percent over the previous year, suggesting more new homes will be built. Of course, home prices striding toward levels in New Jersey and suburban Philadelphia are bad news for first-time home buyers, who need larger down payments and have to absorb larger mortgage payments than just a few years ago. Both home sales and new listings continued to move higher, according to 12-month averages, which eliminates the seasonal nature of house-hunting. gregory.karp@mcall.com 610-820-6603 Copyright © 2005, The Morning Call |