The Economic Data Global Express (e-EDGE)

v.4 n.51       Released Dec. 18, 2000 
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

FED TO SHIFT BIAS AND SIGNAL RATE CUT EARLY IN 2001

     The Federal Open Market Committee (FOMC) will meet tomorrow to decide whether its Christmas gift to the nation's economy and financial markets will be to cut interest rates immediately or to set the stage for delivering this gift on January 31st, 2001.  The arguments in favor of one policy decision over the other are so finely balanced that they somewhat mirror the Bush/Gore electoral vote conundrum.
     In favor of lowering the Fed Funds Rate tomorrow are: (1) the growing number of indicators documenting the weakening of consumer spending, especially for interest-sensitive big-ticket items; (2) mounting concerns about credit quality; and (3) widespread announcements by corporations of employee layoffs.  On the side of waiting six more weeks are: (1) 4th quarter GDP figures would be available and a 2% annual rate of expansion (or close to this) would remove any further doubt that a rate cut is needed; (2) more details of the Bush Administration tax cut, which would be known and taken into account.
     We do not expect the FOMC to break with tradition and throw caution to the winds.  In fact, its members are likely to act like U.S. Supreme Court justices and move with "all deliberate speed."  Some members will argue that inflation could surprise on the upside while others will argue that the risk of recession has increased.  The most likely outcome is a shift from a tightening bias to neutral, but no rate cut.  That Christmas gift may be wrapped, but will stay undelivered until next January. (Ken Ackbarali)
 

STATE, LOCAL UNEMPLOYMENT RATES FLAT TO DOWN IN NOVEMBER

     California's headline unemployment rate was 4.8% in November, about even with October and 0.1 percentage point below November 1999.  (The lowest rate so far for this economic expansion came last February, when unseasonably good weather produced a 4.6% rate.)  The state's jobless rate has been under the 5.0% mark for 6 of the first 11 months of 2000, and it looks like the year will finish up near 4.9%, the lowest since 1969.  (These figures are all adjusted for normal seasonal variation.)
     Jobless rates at the county level are not seasonally adjusted.  Most urban California counties normally register about the same unemployment rate in November as in October, though you'd never learn that fact from looking at Southern California.  Los Angeles County's unemployment rate dropped to a startling 4.9% in November from 5.4% in October and from 5.6% last year.  While this figure may be revised up a little in next month's report, we'll take it.  L.A. hasn't seen an unemployment rate below 5.0% since the late 1980s' economic boom.  Orange County's jobless rate was 2.2% in November, lowest in Southern California, and down by 0.2 points over the month and by 0.2 points over the year.  Riverside and San Bernardino counties' rates also fell in November, to 5.1% and 4.2% respectively, and were even with last November.  On the other hand, the unemployment rate rose over the month to 4.7% in Ventura County, where agriculture plays a strong role in the local economy, though it was down 0.2 points compared to November 1999.  San Diego's unemployment rate was a low 2.6% last month, down from 2.9% in October and from 2.8% in November 1999.
     The jobless rate also declined in the 8-county Bay Area to 2.1% in November from 2.2% in October.  San Jose, with an unemployment rate of 1.5% last month, continued to test just how low unemployment can go.  The San Francisco MSA dropped below 2.0% again to 1.9%.  Compared to last year, San Francisco's unemployment rate was down by 0.1 point while San Jose's rate dropped by 0.9 points.  Labor markets are also quite tight in the East Bay: Alameda/Contra Costa counties' jobless rate dropped to 2.5% in November versus 2.8% during November 1999.  With the close of the growing season, unemployment rates rose last month in much of central California.  Some 13 counties registered double-digit rates of joblessness.  Fresno and Tulare counties, for example, had unemployment rates of 14.8% and 16.3% respectively, and Kern County rose to 11.7%.  The Sacramento area continues to outpace the rest of the Valley.  Metropolitan Sacramento's jobless rate was down to 3.6% in November.  (Nancy D. Sidhu)
PR: http://www.edd.ca.gov/nwsrel12.htm
PR: http://www.calmis.cahwnet.gov/file/lfmonth/cal1$pr.txt
 

NOVEMBER JOBS REPORT STRONG

     According to the California Employment Development Department, the state's job machine rumbled forward again in November.  Total nonfarm employment (not seasonally adjusted) was up over the year by 3.1% or 444,900 jobs.  From October to November, the gain was 97,400.  The largest number of new jobs was found in services (+183,600), government (+75,600) and retail trade (+64,600).  Of note was the continued rebound in manufacturing, with the November total up over the year by 3,900 jobs.  The electronics manufacturing sector contributed heavily, with an increase of 5,500 jobs.
     Los Angeles County also posted pleasing gains in November, with an increase over the year of 1.9% or 79,100 jobs.  The increase over October was 32,700.  The leaders over the year were services (+34,000 jobs), government (+17,800) and retailing (+12,900).   Manufacturing continued its slide, losing 10,000 jobs, with aerospace contributing 7,300 and apparel production 3,100.  Motion picture production employment, at 142,800, was up over the year by a paltry 1,100 jobs, and was down from October's count by 500.  Our sources tell us that two large "units" (companies or payroll processing firms) did not report, so this number will be revised, probably upward judging by all the location shoots.
     Orange County's nonfarm employment in November was up 2.7% or 36,700 jobs compared to last year.  The largest number of new jobs were found in services, construction and manufacturing.  (We got an advance peak at Disney's Grand Californian Hotel, and it is very impressive.)  The Riverside-San Bernardino area continued to set the regional pace in nonfarm job growth, up over the year by 4.1% or 39,400 jobs.  The largest increases were found in services, retailing and construction (but manufacturing was right on their heels).
     San Diego County continued its modest growth pace, with a November gain of 2.0% or 22,900 jobs.  The sector leaders were retailing, services and construction.  Manufacturing also added jobs over the year.  Ventura County's nonfarm employment count was up by 2.1% or 5,600 jobs.   The leaders in numerical growth over the year were services, manufacturing and government.
     In the Bay Area, the San Francisco metropolitan area's nonfarm employment in November was up by 2.8% or by 29,700 jobs over the year.  In the San Jose area, the 12-month increase was 2.5% or 24,900 jobs.
     So far so good for California's economy.  But many manufacturing sectors are fretting about a steep increase in the price of natural gas for their production processes.  These include apparel, food and textiles.  Some have indicated that they may have to shut down during the first quarter of 2001.  Stay tuned.  (Jack Kyser)
 

FAVORABLE INFLATION DATA ADDED SUPPORT FOR RATE CUT

     The barrage of inflation-related reports from the Bureau of Labor Statistics (BLS) last week showed that the threat of inflation has lessened.  With the slowing of the economy evident in other reports, analysts now see a rate cut by the Fed to be forthcoming sooner rather than later.  The Producer Price Index (PPI) for finished goods rose just 0.1% last month, despite the 0.4% increase in energy prices.  Excluding the volatile food and energy prices, the core PPI was unchanged.  The PPI for intermediate goods actually dropped 0.2%.  The price index for crude goods (raw materials) dropped 2.0%.  Both the intermediate and crude price indexes are heavily weighted with energy.  The prices paid for imports rose 0.2% last month, with the 2.0% increase in petroleum import prices offsetting the 0.1% decline in other items.  The index for export prices was unchanged.
     Closer to our wallets, the U.S. Consumer Price Index (CPI) rose 0.2% in November, after another 0.2% increase in October.  For the past 12 months, the CPI has risen 3.4%.  The core CPI, which excludes food and energy prices, rose 0.3% and was 2.6% above the year-ago level.  Energy prices rose just 0.1% but had risen by 16.0% in the past 12 months.  Natural gas prices have risen by 25.6% and electricity prices by 2.3%.  Gasoline prices have risen by 21.6% in the past 12 months.  There are huge regional differences in the rate of increases for these energy products, however.  Currently, natural gas prices are still on the rise, while gasoline prices have declined.
     Locally, the CPI for the Greater Los Angeles area declined by 0.2%.  Local CPIs are not seasonally adjusted. Over the past 12 months, the L.A. area CPI advanced by 3.8%.  The core CPI rose by 2.9%.  Gasoline prices declined by 2.4% last month but were 27.2% higher than a year ago.  Utility natural gas prices declined by 8.0% last month because the advent of winter brought an increase in the baseline allowance.  The regular prices were 34.1% higher than a year ago, however.  Electricity prices faced by consumers were unchanged because of the rate freeze.  This freeze may thaw, however.  Southern California Edison has lost billions because of its inability to pass on its higher costs of electricity to its customers.  (George Huang)
US PPI PR: http://www.bls.gov/news.release/ppi.nr0.htm
US Import/Export Prices PR: http://www.bls.gov/news.release/ximpim.toc.htm
US CPI PR: http://www.bls.gov/news.release/cpi.nr0.htm
LA CPI PR: http://www.bls.gov/special.requests/sanfrancisco/ro9cpila.htm
 

NOVEMBER EASING IN CONTAINER TRAFFIC

     The port of Los Angeles has just released its November numbers, and the seasonal slowdown in activity is quite evident.  The number of loaded import containers was up over the year by 14.0%.  While this may seem strong, the growth rates for the 10 previous months can best be described as frantic (think year-to-year gains as high as 44%).  The number of loaded export containers also eased, up over the year by 12.9%.  In November, Los Angeles moved a total of 414,029 containers.  Next week, it's the port of Long Beach numbers.  Nine million container year, here we come.  (Jack Kyser)
   

QUICK STATS:

* BEA: US current account for 3Q00: -$113.8bil. (2Q00: -$105.0bil.)
* BLS: US Producer Price Index for finished goods for 11/00: +0.1% (10/00: +0.1%)
* BLS: US export prices for 11/00: +0.0% (10/00: -0.1%)
* BLS: US import prices for 11/00: +0.2% (10/00: -0.5%)
* BLS: US Consumer Price Index for 11/00: +0.2% (10/00: +0.2%)
* BLS: Los Angeles Consumer Price Index for 11/00: -0.2% (10/00: +0.3%)
* Cal EDD: California unemployment rate for 11/00: 4.8% (10/00: 4.8%)
* Cal EDD: California nonfarm employment for 11/00: +97,400 (10/00: +69,400)
* Cal EDD: LA County unemployment rate for 11/00: 5.0% (10/00: 5.5%)
* Cal EDD: LA County nonfarm employment for 11/00: +32,700 (10/00: +23,900)
* Census: US business sales for 10/00: -0.2% (9/00: +0.3%)
* Census: US business inventories for 10/00: +0.6% (9/00: +0.2%)
* Census: US retail sales for 11/00 (advance report): -0.4% (10/00: +0.0%)
* Fed: US industrial production for 11/00: -0.2% (10/00: -0.1%)
* Fed: US industrial capacity utilization rate for 11/00: 81.6% (10/00: 82.1%)

The Economic Data Global Express (e-EDGE) is a free service of the Los Angeles County Economic Development Corporation (LAEDC). Permission to quote any proprietary part of this release is granted given proper credit. Distribution is allowed provided that no modifications are made to the original content. Sponsors of this service do not necessarily endorse all opinions stated herein. For more information, please e-mail to research@laedc.org. To contact LAEDC, please call 213-622-4300.

Subscribe to e-EDGE and receive current economic news and major developments.  Your e-mail address will not be disclosed to any outside party (including e-EDGE sponsors) under any circumstances.

To send us comments regarding e-EDGE, please e-mail to research@laedc.org.