The Economic Data Global Express (e-EDGE)

v.4 n.45       Released Nov. 6, 2000 
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

THE EURO'S TROUBLES MAY NOT BE OVER YET

     Last Friday and again today, the European Central Bank (ECB) intervened in foreign exchange markets to support the euro.  The ECB decided to go it alone this time in contrast with the first intervention on September 27th the when the ECB called on the central banks of the G7 countries to join its move.  In October the euro had slipped below 0.8230 against the dollar, about 30% lower than its initial launch level in January 1999.
     The euro's persistent weakness is tied to:  (1) Net outflows of foreign direct investment (FDI) have surged, especially for European acquisition of American companies.  Net FDI jumped from $38 billion in 1997 to $139 billion in 1999 and is estimated at $167 billion this year.  (2) Investors have been disappointed by the Euro-zone countries' slowness to restructure and liberalize their economies.  High social security payments, employment protection schemes, and restrictions on work and opening hours compare unfavorably with conditions in the U.S., the U.K., and other industrialized countries.  (3) The strong U.S. economy relative to slower growth in the Euro-zone has kept the dollar strong vis-a-vis the euro--5.2% estimated GDP growth in the U.S. in 2000 versus 3.3% in the Euro-zone.  (4) As if this was not enough, the ECB left interest rates unchanged at 4.75% last week, while markets expected an increase.
     In the remaining weeks of this year and early in 2001, the euro is likely to be plagued by uncertainty over the policies of a new American president and administration, with respect to further interventions in foreign exchange markets.  Also creating uncertainty is the pace of U.S. economic growth--is the 3rd quarter GDP rise of only 2.7% the beginning of a sustained slowing or will it be followed by a sizable bump in the 4th quarter?  It seems as if the fate of the euro is as much in American hands as it is in the hands of the gnomes in Frankfurt.  (Ken Ackbarali)
 

U.S. LABOR MARKETS REMAIN TIGHT IN OCTOBER

     The Bureau of Labor Statistics released its Employment Situation report for October indicating the supply of labor in this country is still very tight.  According to the Bureau's survey of households, the nation's unemployment rate was 3.9% in October, equal to the cyclical low point hit first in April 2000 and again in September.  The jobless rate has continued in a low, narrow band (3.9% to 4.1%) for the last 13 months.  October's rate was somewhat below the average for the previous six months, with declines especially noticeable among teenagers and Hispanics.  Note that unemployment was higher among the less educated in October, about 6.4% among those lacking a high school diploma compared to only 1.6% of those with at least a college degree.
     Looking at the hiring side of the labor market, the government's survey of nonfarm employers reported their payrolls increased by 137,000 workers in September after rising by 195,000 workers in September and falling by 79,000 in August.  October was the first month this year in which this survey's results were not distorted by special factors.  Overall net hiring was somewhat less than expected.  However, the new jobs were sprinkled across many industries:  construction, transportation and utilities, wholesale and retail trade, and financial and real estate services.    Even manufacturing payrolls were flat following two months of decline.  [Last month's aircraft manufacturing jobs were about even with September, while textile and apparel payrolls were down by only 10,000 workers.]  Hiring by "personnel supply services," down by 51,000 workers, was the only significant weakness appearing in October.  This decline may just be a temporary blip.  It might also be an early sign of slowing production (temporary workers  which many industries now use -- usually are laid off before the permanent workforce).  We'll have to wait to find out which interpretation is correct.
     In another notable finding of the payroll survey, average hourly earnings of production workers in private industries rose by 0.4% last month and 3.8% compared to October 1999.  This result, at the high end of a two-year range, confirms what many business owners are telling us:  their companies simply have to raise wages and salaries in order to attract/retain good employees in a such a low unemployment environment.  (Nancy D. Sidhu)
PR: http://www.bls.gov/news.release/empsit.nr0.htm
 

U.S. MANUFACTURING SLOWS

    A survey done by the National Association of Purchasing Management (NAPM) shows that the U.S. manufacturing activity index declined for the third straight month, dropping to 48.3% in October from 49.9% in September.  Production has declined because the order backlog continued to shrink. Inventories also are being liquidated to reflect the smaller order book.  Employment, generally a lagging indicator, shrank for the second time in three months.  Price increases have decelerated slightly.  In the long run, higher energy prices will squeeze manufacturers twice--once by raising their costs and the second time by reducing consumer demand. (George Huang)
PR: http://www.napm.org/NAPMReport/ROB112000.cfm
 

U.S. LABOR PRODUCTIVITY GROWTH SLOWS

     U.S. nonfarm labor productivity posted a 3.8% increase in 3Q00, a strong gain but significantly lower than the 6.1% increase scored in 2Q00.  Inflation-adjusted hourly compensation rose by 3.2%, compared to 2.2% in 2Q00.  Unit labor costs (i.e. labor cost per unit of output) rose by 2.5%, a drastic reversal of the 0.2% decline in 2Q00.  Productivity growth was significantly higher in the manufacturing sector, particularly in durable manufacturing.  Manufacturing productivity rose by 6.4% and unit labor costs rose by only 0.3%.  In durable manufacturing, productivity rose by 9.6% and unit labor costs actually declined by 3.4%.  The tight labor market, combined with the emergence of the internet technology and concerns over Y2K, induced many firms to spend heavily on capital investments in the past few years.  Firms are reluctant to let workers go even though business may be slowing.  Weaker productivity growth is one of the consequences. (Jack Kyser)
PR: http://www.bls.gov/news.release/prod2.nr0.htm
 

FILM LOCATION DAYS OFF IN OCTOBER

     It's strange times in the entertainment industry.  The Entertainment Industry Development Corporation's (EIDC) October report on location production days continued to point to sliding levels of activity.  Total production days during the month were down by 8.0% from last year, and were running 7.7% behind year-to-date levels.  Commercial location production activity was weak, due to the strike.  There were only 155 production days in October, compared with 497 a year ago.  For 10 months of the year commercial activity was down 27.4%.  Feature film activity picked up in October, 910 location days versus 826 last year.  However, year-to-date feature activity was down 21.0%.  But Hollywood is ramping up activity to stockpile films in anticipation of labor problems next year.  Just try to hire any crew right now!  (Jack Kyser)
 

SEPTEMBER HOUSING PERMITS UNINSPIRING

     The Construction Industry Research Board's September report indicated continued lackluster levels of new homebuilding in California and Southern California.   For 9 months, total housing permits in the state were up only 5.1%, and we are looking at a full year permit total of about 145,000 units.  Activity in the single family sector is level with last year, with gains coming in the multi-family sector.
     At the 9-month mark, there are mixed trends around Southern California.  Los Angeles County was running 26.3% ahead, with gains in both singles and multiples.  Orange County's 9-month total was up 11.1%, though single family permits were down over the year.  Activity in the Riverside-San Bernardino area was flat, with singles down and multiples up.  However, at 16,823 units this area leads the state in number of permits issued.  San Diego County's 9-month total was down by 10.5%, with weakness in both sectors.  Ventura County's total was also off, by 8.0%, with a decline in the single family permit count.
     In the 9-county Bay Area, the total number of permits was running 1.4% behind 1999 levels.  Santa Clara County had the largest permit total to date, and was running 4.3% ahead.  San Mateo County was leading on a percentage basis, with a thumping 134.7% gain.  But with a 9-month count of only 1,603 units, it's the small base thing once again.  (Jack Kyser)
 

NONRESIDENTIAL CONSTRUCTION MIXED IN SEPTEMBER

     The September nonresidential permit value numbers from the Construction Industry Research Board were mixed.  In Los Angeles County for 9 months, industrial permit values were still running behind last year, but the gap has narrowed to -2.0%.  Office construction was down 32.2%, but retail activity was up by 15.3% to a state-leading $337 million (oh well, never mind).   In Orange County, industrial permit values were off by 41.9%, but office was up 33.9% and retail by 19.3%.
     The Riverside-San Bernardino area's 9 month industrial permit value was up by 29.1% to $414.5 million, while office activity was up 18.2% and retail was ahead by 52.6%.  At $309.2 million, it is hot on the heels of Los Angeles County.  In San Diego County, new industrial building was down by 8.0%, the office sector flat, while retail was ahead by 25.1%.  At 9 months, Ventura County's industrial permit values were off by 16.9%, while retail was down 81.1%.  The office sector was up by 136.5%, but on a small base.
     In the Bay Area, new industrial permit values were up 2.1% year-to-date, but retail was down by 13.0%.  The office sector, however, was up by 206.8%, with the bulk of the activity in San Jose and San Francisco (the latter had $470 million in permits versus zip last year).  (Jack Kyser)
 

HOUSING AFFORDABILITY LOWER

     The housing affordability index released by the California Association of Realtors (CAR) shows that higher home prices are making it harder for families to buy their own residences.  The index measures the percentage of households that can afford to buy a median-priced home.  The index for single-family homes in California dropped to 31% in September, down from 36% in 9/99.  Condos are more affordable at 42%, but still down from 48% a year ago.  The index for LA County is slightly higher at 34%, but it's down from 38% in 9/99.  Orange County is even lower at 27% (9/99: 32%).  Ventura follows Orange County at 32% (9/99: 39%).  Riverside and San Bernardino Counties are the most affordable areas in the Southern California at 47% (9/99: 49%).  Up north, Santa Clara County came in at 20% (9/99: 26%), and the San Francisco Bay Area followed at 18% (9/99: 25%).  The top honor, however, goes to Monterey County--a stunning 14% (9/99: 19%).  Sure our income has been rising, but home prices have been soaring even faster.  (George Huang)
PR: http://www.car.org/newsstand/news/nov00-1.html
 
 

QUICK STATS:

* BLS: US unemployment rate for 10/00: 3.9% (9/00: 3.9%)
* BLS: US nonfarm employment for 10/00: +137,000 (9/00: +195,000)
* BLS: US nonfarm labor productivity for 3Q00: +3.8% (2Q00: +6.1%)
* BLS: US unit labor costs for 3Q00: +2.5% (2Q00: -0.2%)
* Cal Assn of Realtors: California housing affordability index for 9/00: 31% (8/00: 29%)
* Cal Assn of Realtors: LA County housing affordability index for 9/00: 34% (8/00: 33%)
* Census: US construction spending for 9/00: +2.4% (8/00: +1.8%)
* Census: US new home sales for 9/00: +9.2% to 946,000 seasonally adjusted annual rate (8/00: -5.8% to 866K s.a.a.r.)
* Census: US new factory orders for 9/00: +1.6% (8/00: +2.0%)
* Census: US factory shipments for 9/00: -0.1% (8/00: +0.8%)
* Census: US factory inventories for 9/00: +0.2% (8/00: +0.3%)
* Conference Board: US Index of Leading Economic Indicators for 9/00: +0.0% (8/00: -0.1%)
* Conference Board: US Consumer Confidence Index for 10/00: 135.2 (9/00: 142.5)
* Natl Assn of Purchase Mgmt: US manufacturing Purchasing Managers' Index for 10/00: 48.3% (9/00: 49.9%)
* PC Data: Index of Online Shopping for 10/00: 150.2 (9/00: 198.5)

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