The Economic Data Global Express (e-EDGE)

v.4 n.32       Released Aug. 7, 2000
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

U.S. LABOR MARKETS STILL TIGHT IN JULY

     The federal government released its Employment Situation report for July last week.  Here are the most important findings:
     1. According to the Labor Department's survey of households, the nation's unemployment rate remained at 4.0% in July, 0.3 percentage points below July 1999.  The jobless rate has been in a low (3.9%, 4.1%) range since October 1999.  Unemployment rates for most categories of workers showed little change month-to-month.  However, year-to-year declines were widespread.  The tightness of current labor markets has especially benefited workers with less education.  Only 1.7% of workers with a 4-year college degree were unemployed in July compared to 6.4% of those who never graduated from high school.  However, the latter group's unemployment rate has declined by 0.4 percentage points in the past year, while the college degree group's rate has declined by only 0.1 percentage point.
     2. The government's survey of employers reported that nonfarm payrolls actually fell by 108,000 workers in July, compared to an increase of 30,000 in June.  July's shortfall was the first decline in payroll employment since January 1996 and was completely unexpected.  The explanation:  U.S. Census Bureau let go 290,000 Census workers in July after dismissing 138,000 in June.  Meanwhile, private sector payrolls actually rose by 138,000 workers in July, following an increase of 242,000 in June.
     As in 1990, Census hiring/firing practices are having a big impact on total nonfarm employment this year, obscuring the underlying trends in the private sector (and our understanding of current economic trends).  In both years, the Census Bureau hired most of its temporary workforce in the months of March, April and May.  In 1990, most of them were dismissed in July and August.  This year, dismissals began in June and will carry over into August at least.  About 190,000 temporary workers are still on the government's payroll.  (Nancy D. Sidhu)
PR: http://www.bls.gov/news.release/empsit.nr0.htm
 

MANUFACTURING SECTOR SLOWS JUST-IN-TIME

     National Association of Purchasing Management's Purchasing Managers' Index for the manufacturing sector was unchanged at 51.8% in July after four consecutive months of slight declines.  The index indicates that the manufacturing sector is still growing, but at a slower pace.  Details in the report show some clear signs of slowing.  The New Orders Index switched from "growing" to "contracting" for the first time in 19 months.  The Backlogs Index scored the third consecutive month of decline.  Supplier deliveries continue to slow down.  On the other hand, the general speed of inventory liquidation is slowing.  Employment, generally a lagging indicator, continued to grow for the 15th consecutive month.  The labor report from BLS also showed a small rise in manufacturing employment.  Prices of materials continue to increase but at a slightly slower rate, which is good news for interest rate watchers.  New export orders grew slightly but imports stayed the same.  In all, we are witnessing a period of adjustment (soft-landing?) in the manufacturing sector.  The chance of a rate increase later this month may need to be re-evaluated based on this crucial piece of data.  (George Huang)
PR: http://www.napm.org/NewsAndResources/ROB082000.cfm
 

HOMEBUILDING STRONG IN JUNE

     The June report from the Construction Industry Research Board (CIRB) was upbeat.  In California, there was a 9.9% increase over the year in total housing permits issued.  Permits for multi-family units jumped 127.4% over June 1999.  The biggest increases in the latter were in San Diego County (821.6%), Orange County (417.8%), Los Angeles (88.8%), and San Jose (73.2%).
     For the first 6 months of the year, total housing permits are up 7.3% in California.  Los Angeles County is running 32.9% ahead, Orange County is up by 15.6%, while the Riverside-San Bernardino area is ahead by 5.8%.   San Diego County is down a modest 1.4%, while Ventura County's permit total is lagging by 11.5%.
     In the Bay Area, the San Francisco metropolitan area's 6-month total is up by 0.3%, the Oakland metropolitan area is running 3.6% ahead.  The San Jose area is rebounding, with the 6-month total up 24.6% over the year.
     While the percentage changes appear to indicate a healthy level of new homebuilding activity, the reality is that the actual number of new units is nowhere near to solving California's growing housing needs.  (Jack Kyser)
 

NONRESIDENTIAL ALSO HEALTHY

     For the first 6 months of 2000, new industrial construction in Los Angeles has inched back into the positive column, with permit values up by 2.6%.  New office activity continues to lag, down by 35.5%, while retail continues to move ahead, up 12.6%.  In Orange County, new industrial permit values continue to lag, off by 67.7%.  However, office is up 72.8% and retail is ahead 30.0%.
     In the Riverside-San Bernardino area, new industrial permit values are running ahead 23.6%, new office permits are ahead 80.4% (working off a small base), while retail is up 54.1%.  In San Diego County, industrial permits are up 15.8%, office is virtually flat at +0.5%, while retail is frisky, up 69.5%.  Ventura County's industrial permits are running 46.1% ahead, office is up 91.9% (small base), but retail activity continues to lag, down 79.3%.
     In the 9-county Bay Area, industrial permit values for the first 6 months are up by 4.6%, office is up 130.8% (with strong performances in San Mateo and Santa Clara counties), while retail is down 21.2% (despite a burst of activity in Santa Clara County).  (Jack Kyser)
 

JAPAN'S 2001 BUDGET PRIORITIES REPEAT THE SAME OLD "MANTRA"

     Prime Minister Yoshiro Mori's budget guidelines for fiscal year 2001, announced last week, are not too surprising but quite frustrating, disappointing, and frankly sad.  Public works spending amounting to $86 billion, or nearly 10% of the country's total budget for next year, will match this year's fiscal stimulus.  To explain this, consider the following: (a) 3.21 million unemployed workers and a 4.7% jobless rate-no improvement from one year ago;  (b) business failures stuck at about 17,000 annually for 1998-2000-compared with only 1,000 in 1992;  (c) consumers still reluctant to spend; and (d) the slow progress at industrial and financial restructuring.
     Next year's pump-priming will extend a string of 10 years, 1990-2000, which saw an annual average of $92 billion in public works spending, as Japan struggles to emerge from its long-running slump.  One of the effects of this policy strategy is that Japan's net (excluding the social security surplus) public debt-to-GDP ratio of 50% now ranks 3rd highest among OECD countries, after Belgium and Italy (both 100%).  By comparison, Germany and Austria are tied with Japan;  and the United States is slightly lower at 41%. (The U. S. ratio has been reduced from 55% 9 years ago). What is remarkable, though, is that Japan has suffered the most severe deterioration of all advanced industrial countries (OECD club), in terms of fiscal discipline-moving up from a debt-to-GDP ratio of only 5% nine years ago.
     Moody's Investors Service placed Japan on review status a few months, indicating that they might downgrade the country's sovereign debt rating.  One of the factors that will figure in this decision is fiscal discipline.  Consequently, we should not be surprised to see a downgrade later this year or early next year, when the Japanese budget moves closer to adoption by the diet (national legislature). A downgrading of its risk-rating would hurt Japan's national pride, but probably have little impact on its reputation in the international financial community.  Talk about a Catch-22, this one is especially tough.  (Ken Ackbarali)
 

SAG SLOUGH

     The SAG/AFTRA strike against commercial producers drags on and on (it now holds the record for length), with no new negotiating meetings on the horizon.  So far, the strike has not affected the employment numbers for the entertainment industry.  However, the strike definitely registers in the Entertainment Industry Development Corporation's (EIDC) tally of location (off studio lot) production days.  There were 190 commercial production days in Los Angeles during July, compared with 558 last year.  Year-to-date, the EIDC reports that total production days are running 4.6% ahead of the like 1999 period.  Features are down 7.7%, TV is up 8.0%, and commercials are behind 12.6%.  "Photo" is up 70.2%.  (Jack Kyser)
 

QUICK STATS:

* BEA: US personal income for 6/00: +0.4% (5/00: +0.3%)
* BEA: US personal consumption expenditure for 6/00: +0.5% (5/00: +0.3%)
* BEA: US personal savings rate for 6/00: 0.1% (5/00: 0.3%)
* BLS: US unemployment rate for 7/00: 4.0% (6/00: 4.0%)
* BLS: US nonfarm employment for 7/00: -108,000 (6/00: +30,000)
* Census: US construction spending for 6/00: -1.7% (5/00: -0.2%)
* Census: US new factory orders for 6/00: +5.5% (5/00: +4.7%)
* Census: US factory shipments for 6/00: +1.0% (5/00: +2.2%)
* Census: US unfilled factory orders for 6/00: +4.3% (5/00: +1.2%)
* Census: US new home sales for 6/00: -3.7% to 892,000 annual units (5/00: -0.9% 861K a.u.)--this is -12.6% from year-ago level
* Conference Board: US Index of Leading Economic Indicators for 6/00: +0.0% (5/00: -0.1%)
* Natl Assn of Purchasing Mgmt: US Purchasing Managers' Index for 7/00: 51.8% (6/00: 51.8%)

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