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From The Morning Call -- December 4, 2005 Valley's Economy in Overdrive News is good on jobs front; housing market remains strong. Of The Morning Call The Lehigh Valley is usually a pretty average place, economically speaking. But that's changed lately. The jobs picture has been much better than the U.S. average, inflation has been much worse and some parts of the housing market have been even hotter. Last week, the Pennsylvania Labor Department said the unemployment rate in the Lehigh Valley during October was a low 4.4 percent. That easily bested the average for the United States, at 5 percent. In fact, the Lehigh Valley rate is the lowest since July 2001. That was a couple of months before the Sept. 11 terrorist attacks, which triggered a prolonged labor-market downturn locally. The employment slump only started to improve this year, badly lagging the general economic recovery. While employment can mean people are working inside the Lehigh Valley or commuting to jobs outside it, there's evidence the region is creating its own jobs. During October, the labor department counted 336,900 jobs in the region, defined as the counties of Lehigh, Northampton, Carbon and Warren, N.J. That's the second-highest job count ever. It helps that layoffs — painful, common and recurring in the Lehigh Valley during recent years — are now relatively rare. First-time jobless claims, after a record low in September, registered 3,344 in October, down 1 percent from last year and the lowest for October since 2000. While the employment news lately has been good for consumers, inflation has not. Prices have been a drain on consumer finances in the Lehigh Valley during recent years. In September, inflation was running at an annual rate of 4.7 percent, due mostly to a huge jump in oil prices during the July-to-September quarter of the year, according to the third-quarter Morning Call/Kamran Afshar Consumer Price Index released last month. Inflation in the United States was also 4.7 percent during the same period. But that was the first time in two years Lehigh Valley inflation was anywhere near the national average. Prices on a typical market basket of consumer goods and services in the Lehigh Valley have far exceeded U.S. price increases during those years. September's inflation rose locally and nationally after oil prices spiked following the Gulf Coast hurricanes. Of course, those prices — especially gasoline — then quickly retreated. But oil prices are still higher than last year, and predictions about home heating oil and natural gas costs this winter are downright dire. Even if home-heating prices moderate, the higher cost of oil will permeate many consumer prices, such as food, much of which is transported by diesel-fueled trucks. Lehigh Valley diesel prices — today down 13 percent from their September highs — have been slower to retreat than gasoline prices, down 34 percent. ''Our economic system is based on fossil fuels because of transportation,'' said Kamran Afshar, a local market researcher who conducts the local price survey. Medical costs have also far outpaced overall inflation, registering an annual hike of 7.3 percent. ''Health care goes up every time,'' Afshar said. ''This is an issue that will continue.'' Since the summer of 2004, Lehigh Valley inflation has averaged 5 percent, far exceeding its 3 percent annual average. That means workers who didn't get at least 5 percent annual raises are actually poorer. While Lehigh Valley consumers may be poorer in their bank accounts, those who are homeowners are overall far wealthier than just a few years ago. That's because the equity in their homes has risen due to rocketing home prices. Lehigh Valley home prices in October alone rose more than 10 percent, or $20,000, from the year before, to $210,000 on average. It's the fifth-straight month that the average price topped $200,000. The October increase in prices mostly kept pace with the national average, which was 11.7 percent for existing homes. Newly constructed house prices in the Lehigh Valley rose a whopping 22 percent over the year, to an average of $406,000 for a typical four-bedroom, 2.5-bathroom house. The increase far exceeded the 9 percent rise nationally. New construction is apparently in demand. Local municipalities issued 376 building permits in October, 22 percent more than October 2004, and the fifth-straight month of year-over-year increases. By contrast, building permits nationwide fell 1 percent from the previous October. Despite the rise in prices, most experts don't consider the Lehigh Valley real estate market to be a housing bubble because prices in nearby metropolitan markets of New York/New Jersey and Philadelphia are considerably higher. Lehigh Valley home sales in October dipped from the highs seen over the summer, which is a normal come-down from the brisk summer selling season. But sales were 12 percent higher than the year before. Nationally, sales rose just 3.7 percent during the same time. New listings in the Lehigh Valley, an indicator of future home sales, rose 21 percent over the past year. gregory.karp@mcall.com 610-820-6643 Copyright © 2005, The Morning Call |