I sat in on a Charlotte State of the Market session last week and listened to a presentation by Dennis Marstall, the Economic Development Program Manager for the city of Charlotte.  Dennis’ presentation summarized a number of key indicators about Charlotte and the economy:

• Unemployment
• Consumer Spending
• Home Prices
• Confidence Indices

The demand for real estate is very closely correlated with overall employment trends.  The more people who are working, the more:

• demand you have for space – to house these employees (office and industrial space)
• cash in consumers hands – e.g. consumer spending, which impacts the need for retail space and residential demand

Looking back, prior to the recession being recognized (which officially started December 2007, but wasn’t acknowledged until December 2008 by the National Bureau of Economic Statistics), in March 2008 the national unemployment level was 5.1%.  This was the first time unemployment rose above 5.0 since 2005.  Currently, the national unemployment levels are off their 2009 peaks, but have increased each of the past four months to 9.2%.

So, how does this relate to consumer spending?

It’s pretty straight forward: the less people working, the less money to be spent.  Gallup has an interesting self-reporting pull showing average daily spending in stores, restaurants, gas stations and online.  March 2008 vs. March 2011 numbers don’t differ as drastically as June’s numbers from the same time period.  In March 2008, average consumer spending was $81 per day versus the $64 per day in March 2011 ($17 per day delta).  June however, shows a 2008 average daily spending of $104 versus $69 per day in 2011 ($35 per day delta).  You will see in the graph pulled from Gallup’s website, the new norm for average daily spending.

And the impact to home prices?

Obviously, with lower employment levels and consumers watching their bottom line impacts demand for housing.  This is in addition to the increase in distressed properties (foreclosures, short sales, strategic defaults, etc.), has property prices in Charlotte falling back to June 2003 levels according to the Case-Shiller Home Price Index Levels (2002 levels in San Francisco and 2001 levels in Chicago).  Ouch.

Finally, the confidence indices…

These indices are specific to the Charlotte region and are compiled by the University of North Carolina at Charlotte.  From the quarterly report: “a six question survey asking business leaders their opinions about expectations for the upcoming quarter as it pertains to the national and local economy, as well as company sales, profits, hiring plans and capital expenditures.”  The questions are equally weighted and based on a scale of 0 to 100.  A number above 50 indicates expansion, while below 50 indicates contraction.  The third quarter outlook is as follows:

The table shows that overall confidence from business leaders has declined since the previous quarter, but there is still some, slight, optimism for the local economy.

Data, data, data…

There is a slew of economic data available to review, often updated monthly and sometimes more frequently than that.  Here are a number of links to use to review this and similar data:

• Bureau of Labor Statistics (released monthly)
• Employment Security Commission of North Carolina (state unemployment rates are released monthly)
• S&P/Case-Shiller Home Price Index (released monthly)
• Gallup Economic Surveys
• Charlotte Business Confidence Reports (released quarterly)