The Economic Data Global Express (e-EDGE)

v.4 n.33       Released Aug. 14, 2000
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

STATE/LOCAL UNEMPLOYMENT RATES FOR JULY

     California's headline unemployment rate fell back down to 5.0% in July from 5.3% in June.  July's rate was 0.1 percentage point below July 1999.  (All three figures are adjusted for normal seasonal variation.)  The state's unemployment rate has hovered around 5.0% for a year now, despite healthy growth in the economy and a rising employment level.  The explanation?  More people are entering the state's labor force, which has risen by 2.1% over the past 12 months compared to 1.6% during the previous year.  Higher numbers of current residents are seeking employment and more people are moving into the state looking for better opportunities here.
     Jobless rates at the county level are not seasonally adjusted.  Most counties normally register higher unemployment in July as schools shut down for the summer.  This year more temporary Census workers completed their tasks as well.  Los Angeles County's unemployment rate was 5.8% in July, up by 0.4 percentage points from June but down by 0.5 percentage points from July 1999.   Rates for the other 4 counties were flat or up compared to last year.  Orange County's jobless rate was 3.0% in July, up 0.1 percentage point for the month and flat over the year.  On the other hand, Riverside County's jobless rate was 7.2%, up by 1.3 percentage points month-to-month and by 0.7 points year-over-year.  Ventura County's rate also increased sharply month/month, by 1.5 percentage points to 6.0%, but was up only 0.4 points over the year.  San Bernardino County did better; its jobless rate was 5.6% in both June and July and was up by only 0.2 percentage points compared to last year.  Likewise, San Diego's unemployment rate was 3.2% in both June and July, up from 3.1% in July 1999.
     Up north, the jobless rate in the 8-county Bay Area edged up to 2.9% in July from 2.8% in June.  At 2.2%, San Jose continued to lead the region, while San Francisco's unemployment rate registered 2.4%.  Compared to last year, San Francisco's unemployment rate was down by 0.2 points while San Jose's rate plunged by 1.1 percentage points.  Labor markets are a tad looser in the East Bay: Alameda/Contra Costa counties' jobless rate was 3.4% in July, down by 0.3 points from July 1999.  Double-digit unemployment rates are the rule in much of the San Joaquin Valley, with Kern County for example registering 11.3%.  However, the Sacramento area is doing better.  Metropolitan Sacramento's jobless rate was only 4.6% in July.  (Nancy D. Sidhu)
PR (text): http://www.calmis.cahwnet.gov/file/lfmonth/cal$prn.txt
PR (data): http://www.calmis.cahwnet.gov/file/lfmonth/cal1$pr.txt
 

NONFARM EMPLOYMENT DATA STILL CHEERY IN JULY

     Nonfarm employment in California in July increased by 3.2% over the year to a new record level of 14,450,900.  On a seasonally adjusted basis, employment also increased from June, with services setting the pace.  On a year-to-year basis, job gains were posted in all industry sectors except mining and manufacturing.  However, electronics manufacturing is definitely in a rebound mode.
     In Southern California, the July nonfarm employment report was mixed.  Los Angeles County continued to roll ahead, with a 2.0% increase over the year, or 81,000 jobs.  This increase is a continuation of recent trends.  However, manufacturing continued to swoon, with a loss of 12,800 jobs over the year. The same old culprits are still at large: aerospace (-10,100) and apparel (-2,900).  While attention has been focused on the SAG strike against commercial producers, motion picture production employment has been adding jobs month-to-month since April.  July was up by 1,400 from June.  Year over year, the increase was 8,000.  Hollywood is getting more and more concerned about a strike against the major studios next year and is cranking up production of both feature films and TV series.
     In Orange County, nonfarm employment increased by 2.7% in July, or 36,800 jobs over the year.  Nonfarm job growth in the county has been tapering off, with the July gain being the smallest so far this year.  The biggest job increases were found in services (+14,300), construction (+5,200), and government (+5,000).  Of note : the manufacturing sector picked up with an increase of 4,500 jobs in July, the biggest gain since September, 1998.
     The Riverside-San Bernardino area saw a gain of 4.8% in July, or 44,700 jobs over the past year.  The growth trend here has been fairly steady.  The largest gains came in services (+12,700 jobs), construction (+9,000), and government (+7,600).  The area's manufacturing sector also continued to move ahead in July, up by 4,700 jobs.  San Diego County posted a gain of 2.1%, or 24,400 jobs year-to-year in July, the smallest increase to date in 2000.  Over the year, the largest increases came in retail trade (+7,500), services (+5,100), and government (+5,000).  The county's manufacturing sector continued to crawl ahead, up by 1,600 jobs.  Nonfarm employment in Ventura County advanced 1.8% in July or by 4,700 jobs compared to a year ago.  The biggest increase in July came in services, up 1,900 jobs.  Job growth has slowed noticeably in the county this year.  During the first quarter the year-over-year growth rate was well over 4%.
     In the Bay Area, the San Francisco metropolitan area posted an increase of 2.4% or 24,700 jobs in July, San Jose came in at 1.9% or 18,400 jobs, while Oakland recorded a 1.6% or 16,600 gain.  All in all, the employment news in California continues to be quite positive.  (Jack Kyser)
 

JUNE CONSUMER BORROWING WEAKER--BUT CHECK THE NUMBERS

     Consumer credit increased by $12 billion in June, an increase of 0.8% from the May outstandings.  Although this level of credit use is lower than the revised May increase of $14.2 billion (a 1.0% rise), the overall trend for the last several months has been very strong.  Since November 1999, the growth of consumer borrowing has set a hot pace, averaging $11.6 billion per month.  In the context of a low national unemployment rate, low inflation, a booming stock market, and high consumer confidence, consumers do not seem to be worrying about "a day of reckoning."  But, should we worry about the potential implications of rising debt levels?
     The pace of consumer borrowing could cool off in the months ahead for the following reasons:  First, non-revolving debt (loans for autos, boats, and trailers, RVs, student loans, and personal loans) continued to surge in May and June, but consumers will begin to adopt a more cautionary attitude in response to higher interest rates.  Revolving credit, especially credit card balances, has already seen slower growth.  Second, the latest Federal Reserve survey of bank loan officers indicates some tightening of credit standards for the first time in four years.  Third, the latest Federal Reserve's Beige Book reveals that the economy has slowed in 7 of its 12 regions and that consumer spending and retail sales have shown a marked deceleration.
     We may have seen the peak of the borrowing binge, with the ending of the second quarter.  However, we may also be surprised by a surge in the stock market that would re-ignite the economy's growth engines and prompt consumers to keep on borrowing.  Lenders seem to be getting nervous earlier than their customers at this point in the cycle, and this may head off another round of rising delinquencies, bankruptcies, and bad loans.  (Ken Ackbarali)
PR: http://www.bog.frb.fed.us/releases/G19/Current/
 

GOOD NEWS FROM THE INFLATION FRONT

     The Producer Price Index (PPI) for finished goods was unchanged last month, following a 0.6% increase in June.  The PPI for finished goods reflects prices at the manufacturing and wholesale levels.  The 0.7% drop in energy prices offset the 0.1% increase in the core PPI.  Food prices were unchanged after two months of decline.  The PPI for finished goods was 4.1% higher in July than a year ago.  The PPI for intermediate goods rose 0.2% after a 0.9% increase in June.  This index was 5.0% above the year-ago level. The PPI for intermediate goods mostly reflects prices of materials and components that manufacturers use to create final products.  The PPI for crude goods (i.e. raw materials) dropped 1.1% in July after a 5.8% jump in June.  A 2.7% drop in raw food prices and 1.8% decline in the other crude material prices more than offset the 0.4% increase in energy prices.  The PPI for crude goods was 23.4% higher than the year-ago level.  With more and more signs of the economy cooling and inflationary pressure seemingly under control, the chance for an August rate increase just got smaller.  (George Huang)
PR: http://www.bls.gov/news.release/ppi.nr0.htm
 

PRODUCTIVITY RISES--BUT SOME MAY BE LEFT BEHIND

     U.S. nonfarm labor productivity rose 5.3% (annualized rate) in 2Q00, beating the 1.9% change in 1Q00 by more than twofold.  Output rose by 5.9% while the number of work hours increased by just 0.5%.  Combined with the 5.3% increase in hourly compensation (or 1.6% after adjusting for inflation), this translates into a 0.1% decrease in unit labor costs.  This report helped calm fears of wage-led inflation.  Higher labor productivity allows labor compensation to increase without adding to inflationary pressures.  In this tight labor market, however, we would expect faster wage acceleration.  However, the Labor Dept.'s data suggests firms are substituting other inputs, especially machinery and computers, for scarce labor.  This trend is evident in the declining share of labor as one of the inputs (the others being capital, energy, materials, and purchased business services).  Labor productivity is rising not because workers are suddenly acquiring a better work ethic or more energy.  Instead, firms have given them better tools to do their jobs.  What to do with workers in the more labor-intensive industries that make limited use of new tools and machinery is a challenge to policy makers.  People in many of those manufacturing sectors will see their jobs continue to move to countries with lower wage rates.  (George Huang)
PR: http://www.bls.gov/news.release/prod2.nr0.htm
 

AIRLINE TRAFFIC STRONG IN JUNE

     Total passenger traffic at Los Angeles International Airport (LAX) in June advanced 7.1% over the year, sparked by an 11.2% increase in international traffic.  Air cargo tonnage at LAX in June posted an 8.4% gain.  International air cargo tonnage at LAX advanced 9.4% in June, with exports up 4.9% and imports continuing to speed ahead with a 13.1% gain.  Ontario International saw passenger traffic increased 3.5%, while air cargo tonnage was up 9.5%.
     June was a good month for the Burbank-Glendale-Pasadena Airport as well, with a 1.6% gain over the year, the first such increase since September, 1999.  However, the Palm Springs Airport saw June traffic drop 4.2% from the June, 1999 level.  John Wayne Orange County Airport (we are adding this facility to our monthly coverage) posted a year-to-year gain of 11.9%.  (Jack Kyser)
 

HOUSING AFFORDABILITY WEAK

     The California Association of Realtors (CAR) released their June housing affordability numbers (the percentage of households that can afford to purchase a median-priced home), and the situation continues to get more and more distressing.  The state's index in June was 30%, down from 31% in May and 36% last year.  Nationwide, the June affordability index was 52%.
     In Southern California, the Riverside-San Bernardino area was the most affordable with an index of 47% in June, down from 53% last year.  Los Angeles County came in at 39%, compared with 44% in 1999.  Orange and Ventura counties both had indexes of 25% in June.  A year ago, Orange County's index was 33% while Ventura County came in at 44%.  San Diego County's June index was 23%, compared with 32% last year.
     The San Francisco Bay area and Santa County indexes were both at 16% in June, truly a scary situation.  (Jack Kyser)
PR: http://www.car.org/newsstand/news/aug00-4.html
 

QUICK STATS:

* BLS: US nonfarm labor productivity for 2Q00: +5.3% (1Q00: +1.9%)
* BLS: US nonfarm unit labor costs for 2Q00: -0.1% (1Q00: +1.9%)
* BLS: US Producer Price Index for finished goods for 7/00: % (6/00: %)
* BLS: US Export Price Index for 7/00: +0.0% (6/00: -0.2%)
* BLS: US Import Prices Index for 7/00: +0.0% (6/00: +1.2%)
* Cal EDD: California (seasonally adjusted) unemployment rate for 7/00: 5.0% (6/00: 5.3%)
* Cal EDD: California nonfarm employment for 7/00: -61,800 (6/00: +52,000)
* Cal EDD: LA County (seasonally adjusted) unemployment rate for 7/00: 5.2% (6/00: 5.5%)
* Cal EDD: LA County nonfarm employment for 7/00: -25,300 (6/00: -9,800)
* Census: US wholesale trade for 6/00: +1.4% (5/00: +0.4%)
* Census: US wholesale inventories for 6/00: +1.0% (5/00: +1.0%)
* Census: US retail sales for 7/00: +0.7% (6/00: +0.4%)
* Fed: US consumer credit for 6/00: +9.9% annualized rate (5/00: +11.8%)
 

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