The Economic Data Global Express (e-EDGE)

v.4 n.37       Released Sept. 11, 2000 
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

LOCAL UNEMPLOYMENT RATES DOWN IN AUGUST; STATE EVEN

     California's headline unemployment rate was 5.1% in August, the same as in July and up slightly (by 0.1%) compared to August 1999.  (These figures are adjusted for normal seasonal variation.)  The state's unemployment rate has hovered around 5.0% for over a year now, despite healthy growth in the economy and a rising employment level.  Growth in the state's labor force has accelerated to 2.7% over the past 12 months compared to 1.6% during the previous year.  New entrants and re-entrants to California's labor market simply take longer to find their first job than other workers who already know the ropes.
     Jobless rates at the county level are not seasonally adjusted.  Most counties normally register lower unemployment in August than in July.  As a partial offset, more temporary Census workers completed their tasks in August and left the federal government's payroll, especially in Los Angeles, Orange County, and Riverside-San Bernardino.  Net-on-net then, Los Angeles and Ventura counties' unemployment rates both fell to 5.7% in August from 6.0% in July.  However, the jobless rate in Los Angeles was down by 0.3% while Ventura was up by 0.4% compared to August 1999.   Rates for the other 3 counties were down for the month but flat or up compared to last year.  Orange County's jobless rate was 2.7% in August, down by 0.4 percentage point for the month and flat over the year.  Riverside County's jobless rate at 6.8% was high for the region, down by 0.5 percentage points month-to-month, but up by 0.7 points year-over-year.  San Bernardino County's jobless rate was 5.1% in August, down by 0.7% from July and was up by  0.2 points compared to last year.  San Diego's unemployment rate was just a little above Orange County at 3.3%, down from 3.7% in July but up from 3.1% in August 1999.
     Up north, the jobless rate in the 8-county Bay Area fell to 2.6% in August from 3.0% in July.  At 2.0%, San Jose continued to lead the region last month, while San Francisco's unemployment rate registered 2.4%.  Compared to last year, San Francisco's unemployment rate was down by 0.1 points while San Jose's rate dropped by 0.9 percentage points.  Labor markets are only a little looser in the East Bay: Alameda/Contra Costa counties' jobless rate was 3.1% in August, down from 3.3% in August 1999.  Double-digit unemployment rates remain the rule in much of the San Joaquin Valley, with Fresno County for example registering 12.2% in August.  However, the Sacramento area continues to outpace the rest of the Valley.  Metropolitan Sacramento's jobless rate was only 4.0% in August.  (Nancy D. Sidhu)
PR: http://www.edd.ca.gov/nwsrel09.htm
Data: http://www.calmis.cahwnet.gov/file/lfmonth/cal1$pr.txt
 

AUGUST EMPLOYMENT TRENDS STILL STRONG

     While nonfarm employment growth in the U.S. has been weakening in recent months, the trend in California continues to be fairly steady.  The August report from the California Employment Development Department (EDD) reported a 3.0% or 416,300 job increase over the year.  Of note is the nascent recovery in the state's manufacturing sector, with 2 months in a row of year-to-year gains.  The electronics segment is definitely in a growth mode, with year-to-year increases in evidence since April.
     Los Angeles County recorded a 1.8% or 73,600 job gain in August, despite the ongoing decline in the manufacturing sector (-11,700).  Aerospace saw a loss of 9,600 jobs over the year, while 2,800 disappeared in apparel.  Of particular interest in the County's employment data is the trend in motion picture/TV production.  In August, it was 144,300, up by 800 from July and by 2,300 over the year.  If this number holds, it will be a new high level for employment in the industry.  This comes despite the SAG strike against commercial producers and ongoing concerns over run-away production.  (Toronto has reportedly run out of sound stage space.  Que lastima.)
     Elsewhere around Southern California, Orange County checked in with a 2.8% or 38,000 nonfarm job increase in August.  This is in line with recent trends.  The County's manufacturing sector is picking up some steam, with a year-to-year increase of 5,100 jobs.  In contrast, there has been an easing in job growth in the Riverside-San Bernardino area.  August came in at 4.1% or 37,900; during the first 5 months growth rates had been 5% or above.  The weakness is in government, which reflects the end of Census jobs.  The manufacturing sector, however, continues to roll right along, with an August increase of 5,300 jobs.
     San Diego County recorded a 2.1% or 23,800 job increase in August.  2000 nonfarm job data for the County seems to be repeating the 1999 performance: a strong start followed by a weakening in the second half of the year.  The County's manufacturing sector continues to post modest year-to-year gains.  Ventura County is seeing a rather dramatic slowdown in job growth, with August coming in at 2.0% or 5,200 jobs.  During the first 5 months of the year, increases were in the 3% to 4% range.
     In Northern California, the San Francisco area nonfarm employment advanced 2.6% or by 27,400 job in August.  San Jose posted a 2.1% gain or 20,500 jobs during the month.
     Looking at year-to-year numerical job gains for August, Los Angeles County was first in the state, Orange County came in second, Riverside-San Bernardino was third, San Francisco nipped into the fourth spot, and San Diego County was fifth.  (Jack Kyser)
Data tables: http://www.calmis.cahwnet.gov/htmlfile/subject/indtable.htm
 

ANOTHER RATING DOWNGRADE FOR JAPAN--TOUGH BREAK!

     If you were wondering what else could go wrong for Japan, the answer came last Thursday.  Moody's Investors Service, one of  the two leading debt rating agencies, downgraded Japan's yen-denominated sovereign debt to Aa2 from Aa1.  This follows its earlier downgrade at the end of 1998 when Japan lost its treasured AAA rating.  In the face of this bold move, it is interesting that rival Standard & Poor's has not budged and has tenaciously hung on to its AAA rating for Japanese debt securities.  One has to question what S&P knows that Moody's does not.  It may, after all, be just a matter of perception.
     Last Thursday's news of weaker-than-expected investment growth in the second quarter, 2.2%, may have been one of the triggers in the downgrade.  It led to a lowered estimate of 2nd quarter GDP growth from 0.9% to 0.7%--raising serious doubts about the sustainability of economic recovery.  Today, Monday (9/11), the government released its 2Q00 GDP figure (+1.0%), following which yet another supplementary budget expenditure package will be unveiled.  This is expected to be as big as $100 billion and will go a long way towards stimulating economic growth in the final quarter of this year.
     Expectations of modest economic growth in Japan this year and next may be overstated.  Also, our view that the budget deficit peaked last year at 7.0% of GDP may have been premature.  Given continued weakness in business investment and a somewhat lackluster household sector, public sector spending has to carry a heavier burden.  The issuance of additional government securities could end up being a flood, before the situation improves.  The lower debt rating will raise the government's interest expense even more.  What a tough break for Japan!  (Ken Ackbarali)
 

TROUBLE ON THE HORIZON?

     Crude oil prices hit $35 per barrel last week, and gasoline prices at the pumps have risen at a time when prices usually drop.  If you think this isn't bad enough, think again.  Several factors have combined to form a market full of uncertainties and worries.
     First, last week before its meeting in Vienna, OPEC announced its intention to increase crude oil supplies and lower prices to around $25 last week (haven't we heard this before?).  However, on Sunday OPEC announced a planned increase of 800,000 barrels per day starting October 1 without setting a target price.  Perceived as "too little, too late," the announced increase probably won't affect the crude oil prices significantly.  Any chance for a significant drop in oil prices would have to come from cheating (i.e., producing above their quota) by some of the large producers.
     Second, the switch to less polluting gasoline in the Midwest led to some problems at refineries there, and gasoline prices shot up in reaction to supply shortage.  Refineries rushed to meet the demand at the expense of heating oil inventory buildup.  So the stock of heating oil is currently much lower than this time last year, and prices are expected to be much higher.  The East Coast stock of heating oil is around 25 million barrels now; it was around 49 million barrels this time last year.  The Energy Information Administration's (EIA) heating oil price forecast for the fourth quarter is 30% higher than in 4Q99, or $1.31/gallon.  That's more than twice the '89-'99 average of $0.54/gallon.  Can refineries increase supply significantly if we release some oil from the Strategic Petroleum Reserve?  Operating at 98% capacity utilization rate, refineries don't have any "wiggle room," and so even free crude oil won't solve our problems.  Also since heating oil can be further processed into diesel fuel, even those of us living in warmer areas can't escape all the impacts of this potential shortage.
     How about the heating oil reserve in New Jersey being set up by the Federal Government?  At 2 million barrels, it's small compared to the 106 million barrels used in the Northeast last year.  It is only good enough to offset a small, short-term disruption in the market.  At this date, any further buildup in the reserve will only add to the imbalance in the market.
     Third, fuel is substitutable in some cases, and so an imbalance in one sector causes pressure in others.  Natural gas prices are around $4/Kcf (thousand cubic feet) now, compared to $2/Kcf in January.  Thanks to an unusually hot summer, power plants have to generate more electricity to power all the air conditioners, and many of them now use natural gas as fuel in order to meet environmental regulations.  With heating oil prices projected to be higher this winter, natural gas prices have no chance for a reprieve.
     Is there any chance for a relief?  Yes, pray for a warmer winter and cooler summer.  Or else buy an extra sweater next time your neighborhood Kmart has a sale, or start collecting old furniture as firewood...  (George Huang)
Energy prices analysis and data: http://www.eia.doe.gov/emeu/steo/pub/contents.html
Also, PPI and CPI both come out this week.  Should make interesting reading.
 

FOURTH QUARTER 1999 TAXABLE RETAIL SALES -- WOW!

     The State Board of Equalization has just released 4th quarter 1999 taxable retail sales date, and the numbers are stunning.  The state posted a 13.2% gain over the like quarter of 1998, and for the year 1999 sales were ahead 11.5%.  Los Angeles County posted a 4th quarter gain of 12.1% (our data goes back to 1986, and this is the biggest quarterly gain since then), while for 1999 as a whole, sales were ahead 10.1%.  Orange County posted a 4th quarter increase of 12.5%, while for the year the gain was 10.6%.
     In the Inland Empire, the numbers were even better.  Riverside County was up 16.3% over the 4th quarter of 1998, and for 1999 was ahead 15.3% to $10.68 billion.  San Bernardino County checked in with a 4th quarter increase of 13.6%, and a whole year gain of 13.8%.  San Diego County recorded a 4th quarter increase of 13.0% and a whole year 1999 gain of 11.6%.  Ventura County's number were 13.0% for the quarter and 12.6% for the year.
     No detail by store type on a county basis is available at this time, but the Board noted that for the state, big increases were posted by new car dealers and building materials retailers.  Gas stations posted a quarter/quarter gain of 25.0%.  What a surprise.  (Jack Kyser)
Data: http://www.boe.ca.gov/news/tsalescont99.htm
 

QUICK STATS:

* BLS: US labor productivity for 2Q00 (revised): +5.7% annualized rate (1Q00: +1.9%)
* BLS: US unit labor costs for 2Q00 (revised): -0.4% annualized rate (1Q00: +1.9%)
* Cal EDD: California unemployment rate for 8/00: 5.1% (7/00: 5.1%)
* Cal EDD: California nonfarm employment for 8/00: +8,200 (7/00: -13,500)
* Cal EDD: LA County unemployment rate for 8/00: 5.4% (7/00: 5.4%)
* Cal EDD: LA County nonfarm employment for 8/00: -8,900 (7/00: -24,300)
* Fed: US consumer credit for 7/00: +7.7% seasonally adjusted annual rate (6/00: +12.2% s.a.a.r.)
* Census: US wholesale trade for 7/00: -0.3% (6/00: +1.1%)
* Census: US wholesale inventories for 7/00: +0.3% (6/00: +1.0%)
 

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