Hotel Industry Overview: Spring 2013


Hotel Industry Overview: Spring 2013

Summary of Key Performance Indicators

Nationally, RevPAR had a stronger than expected first quarter of 2013 despite the Easter holiday which held down the March numbers. As predicted, most of the growth is coming from ADR, as occupancies approach or exceed the peak levels for this cycle. Most sectors had a strong start to the second quarter, enjoying the easy year over year comparison, although the trend has moderated in the past couple of weeks. Boston, as would be expected, slowed down due to the impact of the April 15 bombing and subsequent business disruptions and we will watch carefully if this affects results during the traditionally strong graduation period and summer season. New York is also showing a slowdown but it is really returning towards more normal levels after a huge first quarter that was driven in part by Sandy-related activity. Washington is showing surprising resilience in the face of the sequesterization, although occupancy is starting to slip, and San Francisco has been exceptionally strong over the past few weeks. Other top performing markets in recent weeks have been smaller areas such as Atlanta and Minneapolis.


The Upper Upscale segment has been the biggest beneficiary of the Easter calendar shift in the second quarter. Group business is traditionally non-existent during the week leading up to Easter, which also usually includes Passover. It came back very strongly in the first two weeks of April, with 40 to 50% pickup compared to last year. It has since fallen back, averaging about a 5% decrease for each of the last three weeks. Group booking pace has generally been reported as steady to moderately increasing after a very slow start to the year.


Q 2 2013 YTD(thru 5/4)

Q1 2013

2012 Total Year

Industry Total




















Upper Upscale




















Key Markets




























































Source: Smith Travel Research, Deutsche Bank, Sun Trust Robinson Humphries


As usual, the public company higher-end brands have generally followed the national trends, although there are a couple of anomalies. Hyatt, for example, reported relatively weak results, citing the impact of renovations and loss of group business, although they said that their group booking pace is starting to pick up. The Westin brand also looked a little weak, but there were no direct comments from management or the analysts. Group shifts may have impacted this brand as well.



Q1 2013

Rolling 4 Quarters

Marriott Full Serv. 5.0% 0.7%


4.2% 1.8%


Ritz-Carlton 6.9% 1.8%


5.5% 1.2%


Sheraton 4.0% 2.0%


3.4% 2.3%


Westin 3.5% 0.3%


3.8% 1.0%


Luxury Collection 7.6% 5.0%


5.2% 2.5%


W 4.8% 1.2%


3.7% 1.2%


Le Meridien 6.6% 2.5%


3.8% 0.6%


Hyatt 3.6% (1.0%)


4.4% 0.8%


Source: Company earnings releases



The performance of the hotel industry keeps defying the malaise of the overall economy. Demand is still growing; supply is still over the horizon, so no worries, right? That seems to be the consensus of industry experts at most of the conferences this year, although a few contrarians are beginning to see dark clouds among the silver linings.


The chart on the following page illustrates how the current cycle compares with the previous ones. Although the percentage increases in GDP and employment have been within the normal range during this recovery phase, the drop leading in to the current cycle was much deeper, so the economy has not yet fully dug itself out of its hole. Most hotel industry experts feel that, to use the favorite baseball analogy, the recovery is clearly in the “middle innings,” but there is some question as to how long the game is going to last. The consensus is that by 2017 or 2018 things will turn, as supply will inevitably catch up at the same time demand goes south, as has happened in most previous cycles. This has disturbing implications for investors who are currently buying hotels and looking to exit in the traditional 4 to 5 year time frame. Some REIT’s have already remarked that they see an end to their acquisition strategy as soon as next year, and several private equity players have indicated that they are not raising any new funds at this time but are just filling out their existing ones and/or cashing out some of their previous hotel acquisitions.


The short term concerns continue to be the effect of government spending cuts, as they directly affect certain markets but also may constrain non-government travel. Even though the furloughs of air traffic controllers were averted, TSA workers and customs officials are still subject to sequesterization, as are potential closures or reduced hours at national parks. International visitors might also be a little more cautious, as undoubtedly there will be more visible security following the Boston attack, which would add to the perception that the US is not really welcoming to foreign visitors.


New supply also worries some analysts, as despite near record low construction levels over the past couple of years, it is definitely trending upwards (about 600 new properties are expected to open in 2013 vs. 420 last year according to Smith Travel). Lenders are definitely starting to get back into the construction loan business, especially for select service properties in gateway cities, and several cities, including Norfolk VA, Ft. Lauderdale FL and Austin TX have recently announced new convention center hotel initiatives.


Despite these concerns, many industry analysts and public companies are upping their forecasts for the year, or at least narrowing the band, driven by the strong first quarter performance and the assumption that the government cutbacks will mitigated. RevPAR is now generally seen as growing in the 6 to 8% range for the next couple of quarters, about 50 to 100 bp higher than previously thought. It is expected, however, to slow modestly in the 4th quarter when the comparisons are tougher. It is also expected that group will continue to grow at a slower rate than transient, as the volume of business already on the books is relatively flat compared to the prior year all the way through the first quarter of 2014. This trend could be reversed if there is an increase in business confidence in the economy, but it could also go the other way if there is more uncertainty. There have been mixed signals over the past few weeks, including slower than expected GDP growth and retail sales, and some are becoming nervous as to whether the housing market recovery can be sustained. This is an important factor in driving consumer confidence, which influences vacation decisions.




Transaction volume is continuing to be fairly strong in top markets like New York, New Orleans and Hawaii. The price per room for some of these properties is definitely getting close to, if not above, replacement cost, which bolsters the argument for new builds. So far this year, there have not been any newly announced major portfolio or M&A transactions; in fact one such deal (HPT’s proposed acquisition of the European operator NH Hotels) recently fell apart due to problems with one of NH’s participating lenders. A list of all major transactions over the past few months is included on the following page.



Some of the more significant recent transactions include:

  • Blackstone purchase of Hyatt Regency Waikiki for $450MM ($365K/key). This is a leasehold (75 years reportedly remaining), and they will also invest $80MM ($63K/key) for renovations
  • GIC, the government of Singapore sovereign wealth fund, finally closed on its purchase out of bankruptcy of the CNL resort hotel portfolio, which included three Waldorf=Astoria branded properties (Grand Wailea in Maui, La Quinta Resort in the Palm Springs CA area and the Arizona Biltmore in Phoenix) and the Claremont Hotel in Berkeley CA. Total consideration was approximately $1.5 billion. Hilton will retain management on the Waldorf’s, and Pyramid Hotel Group will continue to manage the Claremont. KSL, who had owned these hotels in the past was appointed asset manager for these hotels.
  • The land under the 1,300 key Milford Plaza in New York was sold for $325MM to a private buyer. Rockpoint and Highgate were the sellers, who will still own the building subject to a new 99 year lease. Highgate, who is one of the largest hotel managers in New York, will retain management
  • Highgate was also part of a syndicate that purchased the Courtyard Waikiki for $127MM ($317K per key)
  • Sunstone announced that they will purchase the Boston Park Plaza, a 1,053 room property, for $250MM, or $237K per key. Considerable additional investment will probably be needed. The hotel was originally built in 1927 and has seen numerous changes in brand and ownership since then. This transaction is scheduled to close in the third quarter; Highgate will also retain management here.
  • Hersha closed on the newly constructed Hyatt Union Square (NY) for $101MM ($567K/key); this was a turnkey deal from developer McSam Hotel Group who has done many similar deals in lower Manhattan over the last couple of years.
  • Starwood sold both of its W New Orleans hotels to Chesapeake REIT for a total of $93.5MM (average of $188K per key). Starwood will retain management on the smaller one (97 keys) but the larger one (410 keys) may be converted to Starwood’s Le Meridien brand and franchised with a different operator. This is part of an overall Starwood strategy to shed up to $3 billion of real estate while keeping the properties in their system. They executed several similar transactions last year in Chicago, New York and Los Angeles but in those cases retained management, as they do not presently franchise their “W” brand.
  • The 963 key Hyatt in Jacksonville FL (formerly an Adams Mark) was foreclosed by its lender, a syndicate led by US Bank. The loan amount was $195MM.
  • Although not in the US, this is still a significant deal- Intercontinental Hotel Group sold the Intercontinental London Park Lane to a group of Middle Eastern investors for the equivalent of $457MM, a price of over $1 million per key
  • Blackstone closed on the sale of the 424 room Miami Beach Resort to Chetrit Group for $117 MM ($276K per key). Chetrit also bought some other properties in New York earlier this year including the Flatotel which will be converted to residential use.
  • Public REIT RLJ acquired the Humble Oil Building Complex in Houston, containing a Courtyard, a Residence Inn and residential units that they intend to convert to a Spring Hill (all Marriott brands). Acquisition cost was $79.5MM or $151K per key.
  • Hyatt bought the historic Driskill hotel in Austin TX for $85MM. The $450K per key price seems high, but it was confirmed by multiple sources. Seller was Lowe Enterprises, not to be confused with the Loews Hotel chain
  • The James Hotel in lower Manhattan was sold by a private seller for $85MM or $746K per key; it has several popular restaurants. Denihan will remain as manager.


Public Company News

Financing, Mergers and Acquisitions, Executive Changes

  • Pebblebrook recently completed a $97MM issuance of 6.5% preferred stock. The offering was led by Raymond James and Citigroup. They also closed on a $50MM loan secured by a mortgage on the Affinia Hotel Dumont in New York. The loan is non-recourse and is at a 3.14% fixed rate, interest only, for a term for five years. Lender is PNC Bank.
  • HPT’s deal to acquire European hotelier NH has been indefinitely postponed because one of the member banks in NH’s financing syndicate has changed its mind about agreeing to the deal.
  • HPT also raised about $400MM from a new common stock offering in March. Morgan Stanley, BofA Merrill Lynch and Wells Fargo were the lead underwriters.
  • RLJ also executed a public stock offering in March, raising $328MM, with Barclays, BofA Merrill Lynch and Wells Fargo acting as joint bookrunners.
  • Host Hotels issued $400MM of 3.75% unsecured 10 year notes, the proceeds of which were used to retire some 9% debt; they also called $200MM of 6.75% notes which were retired from available cash and $102MM of proceeds from a new common share issuance.
  • Chesapeake refinanced its Newton MA (Boston area) Marriott with a $60MM loan from PNC Bank. The loan is for 7 years at a fixed rate of 3.63% with a 25 year amortization schedule.
  • DiamondRock obtained $102MM of proceeds in two separate secured non-recourse loans- $21MM for the Lodge and Sonoma (10 years 3.96%/30 year amortization) and $71MM for the Westin San Diego (10 years/3.94%/30 year amortization). Two separate lenders were involved, but their identities were not disclosed on the company’s press release or 8-K SEC filing.
  • FelCor announced that Michael C. Hughes will become CFO, replacing Andrew J. Welch, who is retiring. Hughes had been with FelCor since 2006 and was promoted from Senior VP/Treasurer. He previously served in a similar capacity at Wyndham.
  • Hyatt priced $350MM of 10 year senior notes at 3.375%. Proceeds will be used to redeem all or part of $500MM of debt currently outstanding at higher coupons. Goldman Sachs, JP Morgan and Sun Trust Robinson Humphrey acted as joint book running managers.



The table below summarizes Q1 2013 earnings reported by major public hospitality companies. A couple of themes emerge:

  • Solid Q1 performance and lowered risk perception have enabled most companies to raise the lower end of their overall 2013 RevPAR guidance
  • Companies with exposure to large groups and government business generally underperformed, while those with strong New York City presence generally outperformed
  • As noted above, many companies are taking advantage of favorable credit market conditions to strengthen their balance sheets and raise cash for new acquisitions


Company Date Reported Reported EPS* Consensus EPS* Comments
Starwood 4/30/13 $0.73 $0.53 Beat in earnings/EBITDA driven by timeshare and lower SG&A; core results in line; guidance unchanged at 5-7% RevPAR
Marriott 5/1/13 $0.43 $0.40 Raised lower end of RevPAR by 50 bps (now 4.5-7%); group pace decelerated; strong incentive fees
Host Hotels 5/3/13 $0.28 $0.23 Reaffirmed 5-7% RevPAR; no big change in fundamentals; beat was driven by calendar shift and switch to 12 month vs. 13 period accounting
LaSalle 4/18/13 $0.27 $0.25 Solid quarter, guidance un-changed at 5-7% RevPAR growth. Above average DC exposure may be a risk.
Hersha 5/1/13 $0.03 $0.02 Increased low end of RevPAR guidance by 50 bps, now 5.5%-7%; strong performance in NY City continues
Choice 4/29/13 $0.26 $0.27 Miss was $0.03 before taxes; core business was OK but they are spending more than expected on a proprietary cloud-based software rollout
Hyatt 5/1/13 $0.09 $0.08 Soft RevPAR in full service driven by group/Easter shift and renovations; EBITDA missed consensus by 5%
Wyndham 4/24/13 $0.71 $0.67 No surprises in lodging operations; timeshare exchanges a little weak, but offset by lower loss provisions on vacation sales
Pebblebrook 4/26/13 $0.20 $0.18 Raised low end of guidance by 50 bps to 5.5-7%; quarter helped by strong NY results; not as exposed to group or government sectors as most
Sunstone 5/2/13 $0.09 $0.08 RevPAR a little light but good cost control improved margins; plans aggressive acquisition strategy in 2013. Noted $1MM impact from Hilton Honors redemption program changes at their NY hotels
Chesapeake 5/7/13 $0.15 $0.10 Light RevPAR growth (2% for quarter) but margins are expanding and deal activity is picking up

*Generally excludes unusual items; figures are for FFO on REITS


Stock prices

Most hotel company stock prices outpaced the broader averages during the first quarter, but have underperformed so far this quarter. However, many of these stocks are still trading close to their 52 week highs. Laggards (although it should be noted that these stocks still went up since January 1, but not as much as the rest) include Hyatt, who had a relatively poor quarter, and on the REIT side, LaSalle and Diamondrock, who are saddled with properties in underperforming markets.


Publicly traded hotel company stock performance (US based companies with market capitalization in excess of $1 Billion plus selected companies over $500 Million

Company Type Primary Segment (s)

Price as of





Change Since


Marriot International C-Corp Upper Upscale,Luxury, Resorts




Starwood Hotels C-Corp Upper Upscale, Luxury




Choice C-Corp Limited Service




Hyatt C-Corp Upper Upscale




Host Hotels REIT Upper Upscale, Luxury




La Salle REIT Urban boutique, Upper Upscale




Diamondrock REIT Upper Upscale, Luxury, Urban Limited Service




RLJ REIT Limited Service with some Upper Upscale




Sunstone REIT Upper Upscale




Strategic REIT Upper Upscale, Luxury




Pebblebrook REIT Upper Upscale. Luxury




Hersha REIT Urban Limited Service




Chesapeake REIT Upper Upscale




Ashford REIT Diversified-all segments




Hospitality PropertiesTrust REIT Limited Service




Dow Jones Industrial (comparison)




Nasdaq Composite (comparison)




S&P 500 (comparison)




Source: Yahoo! Finance


Other Industry News

  • Owners of the Eden Roc hotel in Miami won their lawsuit against Marriott, thereby releasing them from their management contract, although they are still required to pay an undisclosed amount of damages. Many industry legal experts feel that this is a landmark case in that it sets a precedent for breaking a supposedly “unbreakable” contract. The original claim of mismanagement arose from accusations that Marriott exceeded their contractual authority in making operating decisions that affected the Owner. This continues a string of recent court rulings that have ruled in favor of owners over managers in contract disputes, including the Fairmont Turnberry (also in Miami) and the Waikiki Edition.
  • Choice Hotels has relocated their headquarters from Silver Spring MD to nearby Rockville MD
  • Hong-Kong based Langham Hospitality introduced its Eaton brand into Canada, its first location outside of Asia. This was a conversion of the 1,500 key Toronto Delta, the largest hotel in Canada, which it already owned.
  • In one of the less shocking announcements of the year, Kempinski Hotels is pulling out of North Korea, where it was to operate the 105-story Ryugyong Hotel. But amid bombastic threats of nuclear action by the country’s leader, Kempinski Hotels now claims, as reported by the International Business Times, that “no agreement has been signed since market entry is not currently possible.”
  • Hyatt has listed its Andaz Napa hotel for sale at $75MM for 141 keys ($532K per key)- this would be one of the pricier hotel deals in California if they get close to their asking price, but the key question is whether it comes with a full wine cellar
  • The troubled Morgans Hotel Group is in the news again, this time because one of its major shareholders want to liquidate most of its Miami real estate assets by selling them to an affiliate in exchange for about $200 million of preferred stock and assumption of debt, and also to issue another $100 million of common stock. Other shareholders are concerned about dilution or loss of control and are suing.
  • Legendary hotelier Bob Woolley is back. The founder of the Granada Royale and Crown Sterling Suites hotel chains (both of which were eventually absorbed into Embassy Suites), who is widely credited with inventing the complimentary breakfast and cocktail hour for extended stay guests, has launched a new brand, Woolley’s Classic Suites, with the first one under construction in Denver
  • Whole Foods announced that they were thinking about getting into the hotel business with a health and fitness oriented property to be located in the Austin TX area. They join a growing list of other non-hospitality companies that have attempted to get into the hotel business, with mixed results, including Lego, IKEA and The Biggest Loser.
  • Owner Vornado Realty Trust has apparently decided against demolishing the Hotel Pennsylvania in New York and replacing it with an office tower. Instead, they will remodel and hire a new operator. The hotel, located across the street from Madison Square Garden and Penn Station had its phone number immortalized in the Big Band standard “Pennsylvania 6-5000″
  • Hard Rock announced plans to build a 250 key hotel plus 100 condominium units in Daytona Beach FL. Opening would be in 2016 if the project is approved and can get financing. The city and county have been trying to attract additional hotels there to support their convention center and be more competitive with other Florida venues, but the market there has been soft in recent years due to aggressive development in Orlando, which is only about 70 miles away.
  • Speaking of soft markets, the 349 key former Ritz Carlton at Lake Las Vegas NV is once again rebranding, this time to a Hilton. It was purchased, along with a small adjacent casino, by Kam Sang company for $46.9MM last November.
  • Lane Hospitality, a long established mid-sized hotel management company, is rebranding itself as “Spire Hospitality” and together with new owner AWH Partners is attempting to reposition itself into larger markets.


Special Feature- Golf Industry

The golf industry in the US is closely intertwined with the hospitality business, especially in the contexts of resorts where golf is the main attraction and in private clubs which compete with hotels for social catering business such as weddings. Pyramid has had extensive experience with golf, and is currently or was recently associated with such major golf venues as TPC Sawgrass, Doral, Pebble Beach, PGA West and others.


Unlike the hotel industry, golf has been on a downward trend for some time, because the number of players has remained stagnant or even been diminishing, at the same time when there is excess capacity on the nation’s golf courses. The statistics seem to bear this out:











# of courses








Rounds Played (millions)








Total # golfers (millions)








Source: National Golf Foundation


Most of the uptick in rounds in 2012 was attributable to much warmer than normal weather last spring in the Northeast and Midwest. For the first two months of 2013, rounds are down almost 8% year over year. Since 1990, there has been a 22% increase in the number of courses, while the number of players has only gone up by 5%. The number of courses has dropped by 3% since peaking in 2005, but the player count has dropped by 14%. Historically, there has been a lot of turnover in the player count, with a steady (but shrinking) core group and a trend of more players leaving than taking up the game each year. There are several factors that cause this, most notably:

  • Time commitment- it takes around 4 to 5 hours to play a full 18 hole round, plus the time needed to get to the course and warm up, not to mention practice time
  • Cost of equipment and greens fees or club membership
  • Frustration: Golf is very difficult for the average person to master, and simply stops being fun if you keep practicing and playing and do not get better


There are also demographic factors at work. The core group of golfers, for lack of a better term, can generally be characterized as “old white guys,” which is to say retired folks who have been playing for years. The baby boom generation, many of whom are approaching that age, did not take up the sport as enthusiastically as their parents, mostly for the three reasons listed above. Younger people seem to have even shorter attention spans and other diversions for leisure, which is perhaps best illustrated by this:


The supply side of golf has changed dramatically over the years. When golf was introduced to the US in the last quarter of the 19th century, it was mostly played at private clubs near the wealthier cities; most of these clubs still exist. There were also a handful of city-owned courses in parks in New York, Boston, Philadelphia and other major cities. Golf courses have also been part of resorts dating back to the early 20thcentury, mostly in Florida and California. Competitive play during this era was dominated by amateurs from the US and the British Isles; Bobby Jones is perhaps the best-known golfer from this period.


Despite a few attempts with such fads as miniature golf in the 1920′s and again in the 1950′s, golf really did not get into the consciousness the average American until television broadcasts of tournaments made golf professionals into celebrities. In the 1960′s, Arnold Palmer and Jack Nicklaus became the faces of American golf. Demand began to pick up, and course construction began to accelerate during the 1960-1980 period, with many in planned retirement communities such as Sun City Arizona.


After stalling during the 1980′s, golf began to pick up again in the late 90′s. A key factor to this boom was improvement to equipment. Mass-produced clubs using lightweight materials and with bigger hitting surfaces made the game somewhat more forgiving, although these clubs are pricey and there is still controversy about allowing even more such improvements because the organizations that set the rules and control the tournaments do not want to have two sets of standards for amateurs and professionals.


New suppliers of capital to the industry such as Textron (who not so coincidentally also manufactures golf course maintenance equipment) helped boost construction of additional golf courses, mostly in conjunction with upscale housing development, but also for some stand-alone courses mostly in suburban Sun Belt locations such as Houston, Phoenix and Atlanta. Golf marketing also became more sophisticated as we entered the 21st century. Tiger Woods became the poster child for this movement, and even today, tournaments that he plays in still command TV ratings that are three times higher than when he does not play. The industry also began to recognize its demographic limitations and focused on inner cities with programs such as First Tee.


One of the effects of the last construction boom was shrinkage in the number of private clubs, as the potential pool of members was siphoned off by residential golf communities. Older clubs gradually began to close or become semi-private, as the stream of membership dues dwindled while operating costs remained high. Spikes in oil prices resulted in large increase in the costs in fertilizers and other chemicals used on golf courses such as pesticides and weed-killers, and water conservation also became issues.


There was also some consolidation on the management side of the business, not only for economies of scale in purchasing, but also for applying more scientific practices of agronomy and the ability to offer reciprocal memberships. Many of these ran into trouble with too much real estate exposure during the ensuing down cycle, but a few of the larger ones are still going strong, most notably Club Corp and Troon Golf.


Most industry experts feel that there are at least a few more years left in the current down cycle, with continuing shutdowns of courses and little, if any, new development, while player participation rates remain stagnant or declining. Golf course construction costs have increased rapidly due to scarcity of land (about 200 acres is necessary for a “championship” level 18 hole layout) and environmental sensitivity to removal of trees and grading to minimize erosion and chemical run-off. As a result, an 18-hole golf course could probably not be built today for less than $5 million, and costs of two to four times higher than that would not be unusual in certain parts of the country. A big component, especially on the higher end, is the cost of a “name” designer. Fees charged by the likes of Jack Nicklaus, Tom Fazio or Pete Dye run into the millions.


As mentioned previously, operating costs are also a factor. Even a run-of-the mill course can easily cost $500K per year to maintain, and higher end courses, or courses in areas with high water costs run $1.5 to $2 million per year or more. As a typical private club would have around 300 active members per 18 hole course, this means that there is a minimum investment of about $20 to $40K per member required, plus costs of $250 to $500 per member per month, just for the golf facilities, let alone the cost of building a clubhouse and other amenities such as swimming pools or tennis courts.


The economics of operating a daily-fee or resort course are also challenging. Under perfect conditions, a golf course has a capacity of about 60,000 rounds per year, which is an average of about 160 tee-times (40 foursomes) per day. However, very few locations in the US have 12 month availability. Those in the North generally only play from April through October, and while the Southern and desert locations do not have the cold, the heat and humidity make play difficult during the summer, which is when the availability is greatest due to the length of the day. If a course can do 35,000 rounds they are doing well, and 40,000 rounds is exceptional. Again, we do the math. Maintenance alone would cost $20-$30 per round, and amortizing the capital (say over a 15 year period) would cost another $20 to $40 per round, so you need to charge $40 to $60 per round just to break even. To put this into perspective, over half the daily-fee courses in the US have peak weekend greens fees of $40 (with cart!) or less.



US Economy General Statistics


No major changes have been noted in the trends of the key economic indicators in recent months, which paint a picture of cautious consumers- not overly pessimistic, but still somewhat restrained in their spending.




GDP Q1 2013 Increased at annual rate of 2.5% . Q4 of 2011 revised to 0.4% (vs. negative 0.1%). The positive drivers were consumer spending and increases in inventories, which more than offset reduced government spending. Trend reinforces notion of relatively weak recovery.
ConsumerConfidence Apr-13 The University of Michigan Consumer Sentiment Index declined to 76.4 from 78.6 in the previous month, but was somewhat above expectations. Factors include higher payroll taxes and limited job growth, although rebounding home prices are helping to stabilize overall household wealth.
Unemployment April-13 The unemployment rate continues to decline and is now at 7.5%. 165K jobs were created in April. This rate has been steady for the past few months but is still below replacement levels. Sectors showing the biggest increases included restaurants, temporary help agencies, retail trade and health care. Construction and manufacturing were unchanged, but the overall average length of the workweek declined. Labor force participation also continues to decline, and is now 63.3%, lowest in years; it had historically been in the 65-66% range and has dropped steadily since Q4 of 2008.
CPI Mar-13 CPI decreased by 0.2% in March, and the annual rate of increase is 1.5%. Much of this was attributable to a 4.4% drop in gas prices; if food and energy were excluded there would have been a 0.1% increase. Trends have remained relatively stable.
Retail Sales Mar-13 Down 0.4% for the month and up 2.8% vs. year ago; sales were up 3.7% for the first quarter, reflecting some upward revisions. These figures closely mirror GDP and confidence readings, as well as other items such as consumer credit, which continue to suggest that consumers are being careful in their spending.
Housing Mar-13 New home sales were at a seasonally adjusted annual rate of 417K units, up 1.5% from the previous month and up 18.5% vs. prior year levels. Sales of existing homes dropped 0.6% in March but remain 10.3% above March 2012. Prices were up 11.8%, and have increased for 13 consecutive months, with the biggest increases in the West, as California, Phoenix and Las Vegas continue to recover. The March sales decrease is thought to be a blip caused by low inventory levels, which are running 17% below last year

Sources: National Bureau of Economic Research; various government agencies including US Department of Commerce