The Economic Data Global Express (e-EDGE)

v.5 n.11       Released Mar. 12, 2001
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

FEBRUARY LABOR MARKET REPORT BETTER THEN EXPECTED

     The Bureau of Labor Statistics just released its Employment Situation report for February.  According to the Bureau's survey of households, the nation's unemployment rate remained at 4.2% in February, still relatively low though higher than the average 4.0% seen in 2000.  Most month-to-month changes were small, though the unemployment rate for black workers dropped from 8.4% to 7.5%.
     How does this report, which looks pretty good on the surface, square with alarming headlines of mass layoffs that we've been reading recently?  For starters, if you read beyond the headlines, you'll discover the actual damage probably will be less than the headlines imply.  Some firms will make the announced staff cuts by not replacing workers who leave, whether for retirement or for new positions elsewhere ("attrition").  Others do plan to fire workers, but over a period of months or even years.  Still, the number of actual layoffs is rising.  The Bureau reported that the number of "newly unemployed" (out of work for less than 5 weeks) increased from about 43% of total unemployment in December to 47% in February.  However, more than half of them found positions soon thereafter.  The share of those unemployed between 5 and 14 weeks dropped from 33% to 28% over the same period of time.  In this environment, the less educated are being left behind.  The unemployment rate for workers without a high school diploma jumped from 6.3% in December to 7.7% in February, while the rate for high school graduates but no college increased from 3.4% to 3.8%.  Meanwhile, unemployment rates for workers with at least some college remained stable.
     Looking at the hiring side of the labor market helps to explain some of the educational differences.  The BLS survey revealed that total nonfarm payrolls increased by a greater-than-expected 135,000 workers in February, following revised increases of 224,000 workers in January and 36,000 workers in December.  Most major industries outside of manufacturing increased hiring last month.  Employment in service industries rose by 95,000 jobs, led by higher job counts in the computer and data services industry, which were up by 15,000.  Retailers and governments each added 37,000 to their payrolls, while financial industries and construction payrolls each rose by 16,000 jobs.
     However, manufacturing payrolls--which include many workers without college training--plunged by 94,000 jobs in February after falling by 96,000 jobs in January.  Taken together, the January-February losses exceed all the manufacturing jobs lost in 2000.  Many manufacturing industries reported lower job counts in February.  Two positive notes emerged amidst all this gloom.  First, employment at help supply firms was flat in February, following four months of decline that totaled 181,000 jobs.  Second and even more encouraging, employment in the bellwether motor vehicle industry increased by 13,000 in February, as the Big Three ended temporary shutdowns at some plants.  (Nancy D. Sidhu)
PR: http://www.bls.gov/news.release/empsit.nr0.htm
 

JAPANESE GROWTH IN Q4/2000 STRONGER THAN EXPECTED--BUT..

     Figures released today show that the Japanese economy, measured by GDP, expanded at an annual rate of 3.2% in the fourth quarter of last year.  This follows actual contraction of the economy in the third quarter (-2.4% annual rate) and disappointingly little growth  in the second quarter (0.9% rise at an annual rate).  The principal factor behind the latest figures was strong capital investment by the business sector.  Concerns continue to be focused on weakness in consumer spending, weak fiscal stimulus, and weakening exports as demand in major regions of the world show signs of softening.
     With Prime Minister Mori tacitly acknowledging rumors of his resignation, as early as April, uncertainty and sagging confidence can be expected to heighten.  Until a successor is named and elections to the upper house of the legislature are held in July, structural economic reforms are likely to come to a standstill.  Even worse, monetary and fiscal policies are also likely to flounder.  Given recent developments, the economic outlook for Japan this year is even more fragile than depicted in our December 2000 forecast, i.e. a 1.8% increase in GDP.  (Ken Ackbarali)
 

HOMEBUILDING STRONG IN JANUARY?

     According to data from the Construction Industry Research Board (CIRB), new homebuilding in California ostensibly got off to a strong start in 2001.  The year-to-year increase in permits issued was 31.7%.  However, the CIRB noted that recent increases in permit fees inflated the total.  The city of Los Angeles had a significant fee increase, as did Brentwood in Contra Costa County (yes, there is one).  The January permit total for Los Angeles County was up a thumping 169.0% over the year, as a result.
     Elsewhere in Southern California, the January performance was mixed.  The number of housing permits issued in San Diego County was up by 58.8%, while Ventura County posted a 33.8% gain, and Riverside County saw an 18.0% increase.   However, Orange County experienced a 14.4% decline in permits issued in January, while San Bernardino County slipped by 8.8%.
     In the 9-county Bay Area, the January housing picture was also mixed.  Overall, the number of permits was down over the year by 5.1%, with Santa Clara County off by 64.4%, and Alameda County down by 19.4%.
     With the January housing permit data skewed, and wet weather impacts (glub) on activity statewide in February and March, it will be difficult to assess the health of California's homebuilding industry until we get April data.  (Jack Kyser)
 

NONRESIDENTIAL CONSTRUCTION ALSO MIXED IN JANUARY

     According to the CIRB, nonresidential activity in January was also mixed.  A big surprise was the weak performance in the Riverside-San Bernardino area.  New industrial permit values were down over the year by 19.1%, office was off by 15.6%, and new retail construction was down by 50.9%.  Los Angeles County saw industrial permits jump 79.4%.  The gain in office was too big to calculate (helped along by a $91 million office project in Los Angeles -- if it's who we think it is, it already has a lot of leases signed), while retail permit valuations were virtually flat with just a 0.9% gain.
     Orange County saw industrial activity move up by 58.9% in January, but there were no office permits issued during the month, while retail dropped 55.0%.  San Diego County recorded an increase in the office sector (+110.4%), but saw declines in industrial (-80.6%) and retail (-77.2%).  In Ventura County, there was such  a burst of activity in all three sectors that percentage changes over the year were too big to be calculated.
     The 9-county Bay Area got off to a strong start in January,  with industrial permit valuations up 140.1% (thanks to a big project in San Jose), office up by 249.5% (big projects in Alameda, San Francisco, San Mateo and Santa Clara counties), while retail permit values were ahead by 47.8%.  (Jack Kyser)
 

AFFORDABLE HOUSING?  BETTER NEWS FOR ONCE...

     Housing affordability in California held steady on a year-over-year basis for the first time in nearly two years, according to the California Association of Realtors.  The recent moderation of home prices finally put a stop to falling affordability, at least for now.  The affordability index measures the percentage of households that can afford to buy a median-priced home by comparing their income to the current median price and mortgage costs.  At 34%, California is significantly less affordable than the national average of 57%.  LA County was slightly above the state average at 38%.  Orange County was the least affordable county in the Southland with 28%.  Ventura County came in at 36%.  The Inland Empire, at 52%, remained the most affordable area around.  San Diego County came in at 25%.  Up north, high prices mean low affordability despite well-publicized higher incomes for some residents (but forget those stock options).  The San Francisco Bay's 18% rate hid the stunning low rates in San Francisco (10%) and San Mateo (13%) counties.  Monterey (16%) and Santa Clara (17%) counties also suffered extremely low affordability.  Got a job in San Jose but can't afford to live there?  Welcome to the world of long commutes.  The Central Valley (including Sacramento) and the desert areas of California are significantly more affordable.  (George Huang)
PR: http://www.car.org/newsstand/news/mar01-1.html
 

LOCATION FILMING ACTIVITY CONTINUES TO CLIMB IN FEBRUARY

     According to the Entertainment industry Development Corporation, the number of off-lot filming days in Los Angeles in February was up by 6.0% over the year.  This was down from January's 38.7% surge.   Feature film production was ahead by 5.0%, while TV was up a hefty 24.8%.  However, commercial filming days were down 11.3%.  In the meantime, the domestic box office continued to gobble-up the dollars, standing 24.0% ahead of the comparable 2000 total.  But negotiations between the writers and the studios have broken down, which has cast a chill over Hollywood.  (Jack Kyser)
 

FUTURE WATCH: AIR PASSENGER DEMAND

     While air travel is burgeoning worldwide, a happy confluence of wealth, geography and population have made the United States the largest national air travel market.  The three busiest passenger airports in the world -- Atlanta (ATL), Chicago O'Hare (ORD) and Los Angeles (LAX) -- are all in the U.S., as are six of the top ten and fourteen of the top twenty.  And no wonder.  Since 1960, the U.S. population has grown roughly fifty percent, yet the number of air passengers has ballooned nearly 11-fold.  Air travel in America has outstripped population growth for the past forty years, and the trend is expected to continue.
     In Southern California alone, air passenger demand is expected to almost double from 82 million annual passengers (MAP) in 1998 to 157 MAP in 2020. Dealing with this growth presents several critical challenges.  First, LAX is already the number one origin and destination (O&D) airport in the world.  Atlanta and Chicago are busier in terms of total passengers, but many of those travelers are just there to make connections and never leave the airport.  As the top O&D airport, LAX must also deal with getting passengers to and from the airport -- making ground access a top priority to avoid gridlock around the airport.
     Second, LAX serves most of the domestic and virtually all of the international passengers in the region stretching from San Luis Obispo to the Mexican border.  Indeed, 75% of the region's air passenger traffic moves through LAX. This concentration of service is one reason LAX is the third busiest airport in the world.  By contrast, none of the three airports serving New York/New Jersey are among the ten busiest, yet combined Newark (EWR), New York (JFK) and La Guardia (LGA) easily surpass number-one ranked Atlanta in total passengers.  Southern California will need to improve ground access to LAX and develop alternative airports if we are to handle the future traffic. (Gregory Freeman)
Sources: US Census Bureau, Air Transport Association, ACI Traffic Data, Southern California Association of Governments, Los Angeles World Airports
 

QUICK STATS:

* BLS: US unemployment rate for 2/01: 4.2% (1/01: 4.2%)
* BLS: US nonfarm employment for 2/01: +135,000 (1/01: +224,000)
* BLS: US nonfarm labor productivity (revised) for 4Q00: +2.2% annual rate (3Q00: +3.0% a.u.)
* BLS: US nonfarm unit labor costs (revised) for 4Q00: +4.3% a.u. (3Q00: +3.2% a.u.)
* Cal Assn of Realtors: California housing affordability index for 1/01: 34% (12/00: 32%)
* Cal Assn of Realtors: LA County housing affordability index for 1/01: 38% (12/00: 36%)
* Census: US new factory orders for 1/01: -3.8% (12/00: -0.6%)
* Census: US factory shipments for 1/01: -1.1% (12/00: -0.4%)
* Census: US unfilled factory orders for 1/01: -0.2% (12/00: +1.5%)
* Census: US factory inventories for 1/01: +0.7% (12/00: -0.1%) -- inventories-to-shipments ratio rose from 1.32 to 1.35
* Census: US wholesale trade for 1/01: +0.2% (12/00: +0.8%)
* Census: US wholesale inventories for 1/01: -0.3% (12/00: +0.0%)
* Federal Reserve: US consumer credit for 1/01: +12.6% (12/00: +5.6%)
* Natl Assn of Realtors: US existing home sales for 1/01: +3.8% to 5.13 million annual units (12/00: +6.8% to 4.94mil.a.u.)

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