The Economic Data Global Express (e-EDGE)

v.5 n.9       Released Feb. 26, 2001
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

STATE/LOCAL UNEMPLOYMENT RATES IN JANUARY

     Surprising nearly everyone, California's headline unemployment rate fell to 4.5% in January from 4.7% in December, 4.8% in November, and 4.9% in January 2000.  January's rate set a new low for the current economic upswing as well as the past 30 years.  The state's average rate for all of 2000 was 4.9%, the lowest since 1969.  (These figures are all adjusted for normal seasonal variation. Probably, part of January's surprise can be attributed to better-than-normal weather.)
     Jobless rates at the county level are not seasonally adjusted.  The usual seasonal pattern calls for the number of unemployed, and the jobless rate, to rise in January as retailers cut staff hired for December's holiday shopping crush and agricultural activity slackens.  All of Southern California's counties ran true to form last month.  However, unemployment rates in the region were nonetheless below their levels of January 2000.  Los Angeles County's unemployment rate rose to 5.4% following two months below 5.0%.  January's rate was down by 0.4 percentage points from January 2000.  Orange County's jobless rate was 2.3% last month, up 0.3 percentage points from December's record low or 2.0%.  Orange County's jobless rate fell by 0.4 percentage points over the year.  Riverside and San Bernardino counties' rates also rose in January, to 4.7% and 4.6% respectively, and were down by 0.5 and 0.2 percentage points respectively compared to last January.  Ventura County's unemployment rate rose to 4.4% last month and was down by 0.4 percentage points year over year.  Finally, San Diego's unemployment rate was 2.7% last month, down from 3.1% in January 2000.
     The jobless rate increased in the 8-county Bay Area as well, to 2.4% in January from 1.9% in December.  San Jose, with an unemployment rate of just 1.6% last month, continued to lead the state.  At 2.2%, the San Francisco MSA (which also includes Marin and San Mateo counties) was close behind.  Compared to last year, San Francisco's unemployment rate was down by 0.1% points while San Jose's rate dropped by 0.9%.  To the east of San Francisco Bay, Alameda/Contra Costa counties' combined jobless rate rose to 2.7% in January versus 3.1% during January 2000.
     The unemployment picture in the Central Valley was much more varied last month than in the state's coastal region.  The Sacramento metro area was the bright spot of the state's inland region with a 4.0% unemployment rate last month.  At the other extreme, joblessness has risen into double digits in much of central California.  Examples include Merced County at 17.6%, Fresno at 15.3%, Tulare County at 17.5%, Kern County at 12.2%, and Imperial County with a whopping 21.4% unemployment rate.  (Nancy D. Sidhu)
PR: http://www.edd.ca.gov/nwsrel02.htm
 

AT LAST, THE JANUARY 2001 EMPLOYMENT NUMBERS

     And the news was rather good, considering the energy problems in the state and a slowing national economy.   Nonfarm employment in California (not seasonally adjusted) was up over the year by 3.7% or 520,200 jobs, in line with recent trends.  Of note was the strength in manufacturing, up by 31,100 jobs.  Aerospace was in the plus column (+12,100 jobs), as was apparel (+1,200 jobs).  Services continued to set the pace, adding 238,000 new jobs, despite an easing in computer programming.
     Los Angeles County saw nonfarm employment in January move up by 2.2% or 89,500 jobs over the year, again in line with recent trends.  One interesting note was the easing of job losses in manufacturing, with a decline of only 2,800 jobs.  Aerospace was down by 5,400 positions, and apparel was off by just 500.  Motion picture production was up over the year by 1,100 jobs, but there were significant data revisions for this industry (see below).  Nonfarm employment in Orange County was up by 3.9% or 53,000 jobs in January.  Its manufacturing sector added 5,600 jobs, over 10% of the total increase.
     The Riverside-San Bernardino area continued to set the growth pace in the Southland, with a January gain of 4.6% or 44,300 jobs.  Its manufacturing sector added 6,000 jobs over the year.  Ventura County's employment growth came in at 3.3%, or 8,900 jobs, again with an increase, albeit modest (1,500 jobs), in manufacturing.  Nonfarm employment in San Diego County in January was up by 3.8% or 44,100 jobs.  Its manufacturing sector added 5,300 positions over the year.  The January employment numbers for the Bay Area were also strong, despite some power interruptions and problems in the tech sector.  The San Francisco area saw an increase of 5.0% or 52,500 jobs over the year.  Employment in the San Jose area zipped ahead 5.5% or by 106,800 jobs.  (Jack Kyser)
 

THE ANNUAL EMPLOYMENT REVISIONS

     At the beginning of each year, the Employment Development Department revises its nonfarm employment data for the two most recent years.  For the state, the 1999 total nonfarm employment average was bumped up a modest 19,600 jobs.  However, 2000 saw an upward revision of 108,200 jobs.  Los Angeles County usually sees jobs losses in this process, but the downward revisions this time were modest, only 2,400 jobs in 1999, and 5,700 in 2000.  As noted above, there was a significant revision in motion picture industry employment, with the 2000 average being cut back by 5,300 jobs to an average of 135,100.  Evidently, the strike against commercial producers had a bigger bite than initially reported.
     In Orange County, the revisions had little effect on the 1999 data, while the 2000 average total was moved up by 4,400 jobs.  The Riverside-San Bernardino area saw its 1999 average nonfarm employment total moved up by 5,300 jobs, while the 2000 average was moved upward by 12,800.  San Diego County's nonfarm average for 1999 was revised up by 2,700 jobs, while the 2000 revision was a region-leading 18,000 jobs.  Ventura County's 1999 nonfarm employment average was increased by 600 jobs, but 2000 got a healthy (for Ventura) bump of 3,600 jobs.  (Jack Kyser)
Southern California Data Tables (MS Excel 97): http://www.laedc.org/SoCalEmp.xls
 

JANUARY LEADING INDICATORS SURPRISE ON THE UPSIDE

     Last week, the Conference Board reported its Index of Leading Economic Indicators (LEI) increased by 0.8%, about twice the expected rise and its largest increase in over two years.  This pleasant surprise followed three dreary months capped by December's huge decline.  Indeed, the index dropped in 5 of the last 6 months of 2000, confirming the economic slowdown now visible in early 2001.
     The Leading Economic Indicators Index includes 10 components, which represent different aspects of the U.S. economy, and which were selected for inclusion because in the past they consistently turned down (or up) before the overall economy reached a peak (or trough). Seven of the ten components were positive in January, while only three had negative signs.  Five components contributed heavily to last month's increase including: (1) the money supply (M2), adjust for inflation; (2) the average workweek of production workers in manufacturing; (3) new home building permits; (4) initial claims for unemployment compensation; and (5) the spread between the rate on the 10-year Treasury note and the federal funds rate.  Vendor deliveries to manufacturers and consumer expectations both subtracted from the index's January performance.
     We already have a good idea about what some of the components will look like in the February, LEI, and the picture is, well, muddy at best.  Consumer expectations will fall again in February, perhaps by more than in January.  Stock prices also registered a drop for the month, and initial unemployment compensation claims likely increased.  On the other hand, financial components will be strongly positive, thanks to the Fed's prompt actions of January.  The rest of the components will have to decide the issue.
     What message is the LEI sending us about the U.S. economy today?  That depends.  On the one hand, January's performance may be the first indication that the current economic slowdown is no longer deteriorating into recession, as many had feared.  The Conference Board points out that two conditions should hold for the LEI to give a reliable signal of upcoming recession: (1) the Index should have declined by more than 3.5% over the previous 6 months, and (2) the LEI Diffusion Index (the percent of components rising) should have been below 50% over the same time span.  As of January, the second condition was certainly true.  However, the 6-month decline in the Index bottomed in December at 1.4% and was only 0.5% in January.  Unfortunately, the January performance of the LEI cannot settle the recession issue for sure because weather caused some LEI components to drop sharply in December and bounce back in January.  We'll have to wait a few months more to sort out the weather-related impacts from those that truly reflect the real economy.  (Nancy D. Sidhu)
PR: http://www.conference-board.org/search/dpress.cfm?pressid=LEI0201
 

U.S. TRADE DEFICIT REGISTERS A NEW RECORD IN 2000

     The U.S. recorded a deficit on goods and services of $33 billion for December 2000,  down slightly from the November shortfall.  Consistent with slower economic growth in the U.S., especially in the manufacturing sector, imports fell for the fourth month in a row.  Specifically, imports of autos, other consumer goods, and advanced technology products were down.  Softer growth abroad and the strong dollar also took their toll on U.S. exports of computers, semiconductors, and telecom equipment.
     An examination of the data for all of last year is quite revealing.  For the year 2000 as a whole, the trade deficit widened to $370 billion, an increase of nearly 40% over 1999.  The last time the deficit shrank was in 1995 when U.S. economic growth weakened.  From its low point in 1995 to the record gap in 2000, the nation's trade deficit has almost quadrupled.  The higher price of oil, averaging $26.41/barrel in 2000 (highest since 1984) was one of the factors contributing to the sharp rise in the U.S. import bill.
     Our biggest bilateral trade deficit is now with China ($83.8 billion), which replaced Japan ($81.3 billion) for this dubious distinction.  Other big deficits were chalked up with  Canada ($50.4 billion), the European Union ($47.8 billion), OPEC ($47.8 billion), the four Asian Tigers ($26.7 billion), and Mexico ($24.2 billion).  These countries combined accounted for over 80% of the total trade deficit last year.
     In the future, narrowing these gaps by exporting more to our major trading partners instead of reducing (restricting) our imports from them would minimize conflict and benefit most parties.  In good times we tend not to worry about the chronic imbalance the U.S. runs with the rest of the world.  However, a weak American economy/recession, lower interest rates, a falling stock market, and a weaker dollar could prompt repatriation of foreign investment back to home countries and/or curtail the flow of new inbound foreign investment into the U.S.  Given the low domestic savings rate in the U.S., such an outcome would have significant adverse implications for the availability and cost of capital later on.  (Ken Ackbarali)
PR: http://www.census.gov/indicator/www/ustrade.html
 

ENERGY PRICES DOMINATE INFLATION FEARS

    The US Consumer Price Index (CPI) rose by an unexpected 0.6% last month, reviving inflation fears and diminishing some investors' hopes for another quick round of interest rate cuts by the Federal Reserve.  A 3.9% jump in energy prices was the main culprit.  The cost of electricity and natural gas service to homes jumped by 7.7% last month and was 21.6% higher than a year ago.  (For a brief discussion on the natural gas situation, please see the Producer Price Index article in last week's e-EDGE.)  In comparison, home fuel oil costs (e.g., heating oil) rose by just 0.2% on a seasonally-adjusted basis and were 30.3% higher than a year ago. Although the US inventory of crude oil is at the lowest level in 25 years, we probably have enough heating oil this year to avoid another crisis in late winter/early spring. Gasoline prices fell by 0.1% but were 12.4% higher than a year ago.  Food prices rose by just 0.2% last month.  The core CPI, which excludes food and energy prices, rose by 0.3%.  Medical costs rose by 0.6% last month.  The overall CPI for January was 3.7% higher than the year-ago level.  The core CPI was 2.6% higher than a year ago.
     The L.A. Area CPI rose by 0.4% last month and was 3.8% higher than a year ago.  Energy prices actually fell by 0.3% but were 18.0% higher than in January 2000.  Electricity prices rose by 6.9% as a result of an "emergency procurement surcharge" approved by CPUC which affects only Edison customers.  Natural gas service costs declined by 0.1% but were 53.6% higher than a year ago.  Gasoline prices fell by 4.0% but were 14.8% higher than the year-ago level.  Food prices rose by 0.6%.  Significant price increases were also found in medical care (+1.0%) and recreation (+1.0%).
     Last week also saw the release of the semi-annual San Diego CPI report.  The San Diego CPI rose by 3.3% in the second half of 2000 and was 6.8% higher than a year ago.  Because San Diego Gas & Electric (SDGE) had paid off its debt, its electricity prices have been allowed to reflect wholesale market prices since July 1999.  The 2000 "electricity crisis" has thus hit San Diego consumers early and directly in the wallet.  Electricity prices were 54.8% higher than in the first half of 2000.  Meanwhile, natural gas service costs were 32.4% higher than in the first half.  Gasoline prices were 10% higher than 6 months ago and were 23.2% higher than a year ago.
     Monetary policy cannot effective address energy-related issues in the current inflation situation, and thus it is most likely that this batch of news would not significantly impact the Fed's decision on interest rates.  (George Huang)
US PR: http://www.bls.gov/news.release/cpi.nr0.htm
LA PR: http://www.bls.gov/special.requests/sanfrancisco/ro9cpila.htm
San Diego PR: http://www.bls.gov/special.requests/sanfrancisco/cpisand.htm
 

FINAL HOTEL DATA FOR 2000

     PKF Consulting just released their hotel data for both December and the year 2000.    All in all, the numbers were pretty good.  Los Angeles County's hotel occupancy rate eased down to 60.6% in December -- about even with the 1999 number, while the annual average for 2000 was 76.2%.  This was up over the 1999 average of 73.3%.  The average daily room rate for 2000 came in at $122.20, an increase of 6.2%.  There were four sub-markets in the County with 2000 occupancy rates above the 80% level, including the South Bay (83.2%); Marina del Rey (82.7%); Santa Monica (82.2%); and LAX (81.9%).
     Hotel trends in Orange County were much improved in 2000.  Even in December, normally a slow month, the occupancy rate came in at 60.6%, up from 55.4% a year ago.  For 2000, the rate averaged 73.9%, a nice gain over 1999's 69.4%.  The average daily room rate for the year came in at $110.01, up by 5.2%.  The Orange County Airport area registered the highest occupancy rate for the year, an average of 75.0%, just nosing out Newport Beach's 74.8%.  San Diego County's December 2000 occupancy rate came in at 58.0%, up from the 1999 rate of 51.1%.  For 2000, the County's average was 76.2%, compared with 74.4% in 1999.  The average daily room rate advanced 5.3% to $134.81.  The Sports Arena/Old Town area was the clear winner in terms of annual occupancy rate at 85.8%.
     Finally, Ventura County's hotel industry also enjoyed an improved business trend in 2000.  The occupancy rate averaged 68.2% compared with 1999's disappointing 65.7%.  And the average daily room rate climbed 8.5% to $78.86.  (Jack Kyser)
 

JANUARY PORT TRAFFIC AT LONG BEACH

     Long Beach's January container traffic numbers raised a few eyebrows.  Imports continued to move forward, with a 9.0% gain over the year.  However, the loaded export container count fell by 3.8%, the 3rd month in a row of declines.  For January, the twin ports moved 751,434 containers, an increase of 7.8%.  With forecasts of slowing economies around the world, port officials are expecting import growth of 5% to 6% in 2001.  (Jack Kyser)
 

AND FINAL 2000 TRADE VALUES

     The U.S. Department of Commerce has just released December, 2000 data on trade values.  The Los Angeles Customs District posted a 12.5% increase in the value of exports and a 9.0% gain in import value.  For the year, export values at Los Angeles were up by 16.5% to $77.6 billion, while import values moved ahead by 16.8% to $152.4 billion.  Total two-way trade value at the district in 2000 was $230.0 billion, a gain of 16.7%.
     The San Francisco Customs District saw export values in December increase by 21.6%, while imports moved ahead a modest 6.3%.  For the year 2000, export values increased 30.4% to $58.3 billion, while import values were up 15.9% to $68.9 billion.  Total two-way trade value in the Bay Area was up 22.1% to $127.2 billion.  At the San Diego district, December exports were up 21.2%, while imports gained 4.4%.  For the year, San Diego's export values advanced 17.7% to $12.7 billion, while imports were up 16.7% to $22.3 billion.  San Diego's 2000 total trade value was up 17.1% to $34.9 billion.
     And how did New York do trade-wise in 2000?  Its two-way trade total came in at $225.6 billion, so the Los Angeles District retains its number one ranking.  (Jack Kyser)
 

QUICK STATS:

* BLS: US Consumer Price Index for 1/01: +0.6% (12/00: +0.2%)
* BLS: LA Consumer Price Index for 1/01: +0.4% (12/00: +0.0%)
* Cal EDD: California unemployment rate for 1/01: 4.5% (12/00: 4.7%)
* Cal EDD: California nonfarm employment for 1/01: -344,200 (12/00: +80,400)
* Cal EDD: LA County unemployment rate for 1/01: 5.2% (12/00: 5.1%)
* Cal EDD: LA County nonfarm employment for 1/01: -93,500 (12/00: +22,900)
* Conference Board: US Index of Leading Economic Indicators for 1/01: +0.8% (12/00: -0.5%)
* Conference Board: US Help-Wanted Advertising Index for 1/01: 76% (12/00: 79%)
* Natl Assn of Realtors: US existing home sales for 1/01: -6.6% to 4.65 million annual units (12/00: -6.6% to 5.33mil.a.u.)

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