The Economic Data Global Express (e-EDGE)

v.5 n.18       Released Apr. 30, 2001
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

SURPRISE!!  U.S. ECONOMY PICKED UP IN FIRST QUARTER

     Contrary to expectations, U.S. economic growth accelerated during the 1st quarter 2001, as the nation's Gross Domestic Product rose by 2.0% (seasonally adjusted annual rate, or SAAR) compared to 1.0% in 4th quarter 2000 and 2.2% in 3rd quarter 2000.  Meanwhile, inflation accelerated to 3.2%, measured by the GDP price index, from 2.0% and 1.6% in the 4th and 3rd quarters respectively.  The inflation numbers were not particularly surprising, given what's happened to energy prices.  However, most economists had expected this report to show slower--not faster--growth during the past quarter.
     A sector-by-sector look at the demand side of GDP reveals a great deal of strength.  Consumer spending provided the most support to economic growth, led by higher vehicle purchases.  No surprise there.  And the Census Bureau's monthly reports on housing and building activity foretold the first quarter's upsurge in residential and nonresidential construction spending.  On the downside, U.S. exports and business firms' purchases of new equipment and software, declined for the second consecutive quarter.  Quarterly corporate reports of U.S. high tech companies had suggested these declines would be big.  However, falling prices--which are ignored in the GDP growth calculations--probably contributed as much to disappointing revenue growth as unexpectedly low sales volumes.
     How does this GDP report square with widespread reports of distress in U.S. manufacturing?  The answer is visible in the GDP accounts but buried well below the headlines.  During the second half of 2000, sales growth slowed abruptly and unwanted inventories began to pile up in retail, wholesale, and manufacturing plants and warehouses.  By yearend, U.S. companies were cutting production and canceling orders.  During the 1st quarter, businesses actually liquidated inventories, for the first time in almost 10 years, which reduced GDP growth by 2.5 percentage points.  Further, U.S. purchases of imported products declined sharply last quarter, by 10.4% SAAR.  However, this had the opposite effect, raising the reported GDP growth rate by 1.4 percentage points.
     The Commerce Department labeled its release of 1st quarter growth an "advance" estimate because it doesn't yet have all the information it needs to make a "preliminary" estimate.  In particular, we don't yet know anything about March for the following:  residential/nonresidential construction, manufacturing and trade inventories, and U.S. exports and imports.  These figures will be released in coming weeks, and they may not match the Department's assumptions.  In the past, advance estimates have been altered by as much as a full percentage point in either direction.  Stay tuned.  (Nancy D. Sidhu)
PR: http://www.bea.doc.gov/bea/newsrel/gdp101a.htm
 

CALIFORNIA HOUSING MARKET STILL STRONG

     According to the California Association of Realtors, sales of existing single-family homes in California rose by 6.6% to 518,410 annual units from February to March, but were 7.8% below the year-ago level.  At the same time, the median price  of homes sold last month increased 7.4% to $262,980 and was 12.8% above the year-ago level.  Median prices rose in every region of the state, signaling the strong demand for housing.  The Unsold Inventory Index was 3.6 months (i.e., it would take 3.6 months of sales to deplete the current supply of homes listed for sale), up from 3.0 months from a year ago.  Yet the median number of days it took to sell a house was 26, down from 32 days in March, 2000.  Demand is strong and there are plenty of both buyers and sellers out there.
     The price range and rate of price appreciation differ significantly around the state.  L.A. County's median price was $228,260, up by 10.6% from March 2000.  Sales barely increased from a year ago--up 0.2%.  Orange County had the highest median price in Southern California at $344,670, up by 13.2% from a year ago.  Sales volume was 4.7% lower than last year.  The Inland Empire (Riverside-San Bernardino) was the most affordable area in Southern California at $150,610, which was 11.6% higher than a year ago.  Sales volume rose slightly--1.7% above the year count.  Ventura County's median price was $299,050, 4.2% higher than a year ago.  Sales volume declined by 7.3%.  Down south, San Diego saw a median price of $285,530, 11.1% higher in March 2000.  Sales volume declined by 10.6%.  Up north, the San Francisco Bay Area saw its median home sale price rise by 10.1% in a year to $491,860, but sales plunged 20.1%.  The honor of having the highest median price goes to Santa Clara County, whose $565,000 median price was 8.0% higher than a year ago though sales volume dropped by 32.5%.  The Central Valley and the High Desert areas had the lowest median home prices in the State, but they also have some of the highest appreciation rates.  (George Huang)
PR: http://www.car.org/newsstand/news/apr01-3.html
 

A BRIEF NOTE ON THE ENERGY SITUATION

     The energy situation is of great concern to businesses in the County served by Southern California Edison.  Analysis by the LAEDC indicates that the following types of business use significant amounts of electric power and natural gas in their production processes:  livestock products; food products; textiles and apparel; paper & allied products; chemicals; plastics; glass products; primary metals; fabricated metals; and stone, clay & glass products.  The hotel industry and government agencies are also heavy users.
     Industry has been warned that there will be rolling blackouts in the state starting in May.  These will be about 55 minutes in duration.  There are a variety of programs to help firms become more energy efficient, to develop alternate or back-up sources of power, and to find other innovative ways of responding to the situation.  However, business is demanding advance notice of blackouts, not just because of loss of materials in a production process, but also due to potential risks to workers.
     The impact on the economic base to date is mixed.  Some larger firms have indicated that they might shut down their local facilities.  Small to medium-sized firms, for which relocation is too difficult an option, are looking at cutting costs, which unfortunately includes cutting workforce.
     The Federal Reserve Bank of San Francisco estimated that the average Californian household will spend $250 more on electricity and $200 more on natural gas (less in Southern California due to climate) for a $450 increase in utility bills this year.  Add another $300 for indirect effects from higher goods and service prices because of these higher costs and the average increase could be around $750, or about 1.5% of average California household income.  Higher gasoline prices will add another $400-$500 to that higher bill, and will obviously have an impact on spending on goods and services.  Have we given you enough reasons to conserve energy and to streamline your business energy use?  (Jack Kyser)
FRBSF document: http://www.frbsf.org/publications/economics/letter/2001/el2001-11.html
 

FEBRUARY TRADE VALUES MIXED

     Sorry to use that word again.  At the Los Angeles Customs District, the value of exports in February moved ahead by 13.2%, but import values eased by a hefty 9.3%.  The February two-way trade total was down 1.9%, and the year-to-date figure is up by 7.8% over 2000.   At the San Francisco District, February export values were up by 15.2%, but import values slipped  by 6.5%.  The two-way trade value for the month was up by 3.1% over the like 2000 period, and the two-month total is up 9.2%.   Down San Diego way, February export values were up by 4.8%, but import values dipped 5.8%.  For the month, the two-way trade value was down by 2.0%, and for the year-to-date was up a modest 3.4% (this district routinely runs double-digit gains).  (Jack Kyser)
 

AIRLINE TRAFFIC MIXED IN MARCH

     Yet again that word!  At Los Angeles International Airport, total passenger traffic in March was up a modest 0.4%.  International activity carried the month with a 4.3% gain, but domestic traffic was down by 0.8%.   John Wayne Orange County Airport saw March traffic slide by 4.9%, while Palm Springs continued to post declines over the year, down this time by 6.0%.
     The March international air cargo numbers at LAX also were pretty ugly.  Import tonnage was down over the year by 7.7%, while export tonnage dropped  by 21.5%.  The month's total tonnage was down by 14.1%.  (Jack Kyser)
 

CENSUS 2000 BASIC DATA NOW READY

     We've made it easy for you to get them too (see links below).  These data are unadjusted and will be used to redraw Congressional districts.  The racial data are divided into two sections: one with standard classifications and the other with Hispanics set aside as a separate group.  These two files cover the L.A. five-county area.  Unincorporated areas are indicated by their Census Designated Place (CDP) names.  The Excel spreadsheet may look odd on your screen because it is designed for printing.  USC and the LA Times have graphic representations of the results.  Please direct all Census-related questions to the Census Bureau.  LAEDC is not staffed to answer individual questions.
Acrobat PDF document: http://www.laedc.org/Census2000.pdf
MS Excel 2000 spreadsheet: http://www.laedc.org/Census2000.xls
Census 2000 website: http://www.census.gov/dmd/www/2khome.htm
USC's Census 2000 website: http://www.usc.edu/schools/sppd/research/race_census/
LA Times' Census 2000 website: http://www.latimes.com/news/nation/reports/census/
 

WORKFORCE SURVEY RESULTS

     LAEDC surveyed local employers about their workforce earlier this year, and the results have been tabulated.  These results send a strong warning to government officials and the education establishment.  Thirty percent of employers expressed the need to have technology-savvy workers.  This result was hardly surprising given this era of rapidly changing technologies.  The real revelations came from questions about businesses' general concerns (instead of their own firms' needs).  A significant number of respondents wanted schools to do a better job in teaching basic reading, writing, and communications skills.  Some of the respondents emphasized that point quite explicitly.  They also wanted schools to teach basic work ethics and habits, and to help students get some real-life experience through internships.  Students do not get enough exposure to the realities of working life before they are rushed into the job market.  A few respondents also demanded that schools teach students how to think and learn to be flexible.  Businesses are not too worried about workers not getting the proper technology-related training, even though that is what the employers need the most.  Technology skills can be taught much more easily than basic reading, writing, and arithmetic.  Most respondents feel that post-secondary education establishments are not doing enough to reach out to the business community and find out their needs.
     Judging from these responses, it seems that our education system has much work to do (e.g., teach basic reading and writing).  And our post-secondary institutions (four-year universities, community colleges, and training institutions) come out short in terms of their connection to the real world.  Real-life experience can be learned very quickly, but basic reading and writing are skills that take years to build.  Today's education gap caused by the failure to properly educate our children will only worsen tomorrow's income gap.  (George Huang)
 

QUICK STATS:

* BEA: US Gross Domestic Product (advance rpt.) for 1Q01: +2.0% (4Q00: +1.0%)
* BEA: US implicit GDP deflator for 1Q01: +3.2% (4Q00: +2.0%)
* BEA: US disposable personal income for 1Q01: +2.8% (4Q00: +3.2%)
* BEA: US personal consumption expenditure for 1Q01: +3.1% (4Q00: +2.8%)
* BEA: US gross private domestic investment for 1Q01: -11.5% (4Q00: -4.1%)
* BEA: US personal income for 3/01: +0.5% (2/01: +0.5%)
* BEA: US personal consumption expenditure for 3/01: +0.3% (2/01: +0.2%)
* BEA: US personal savings rate for 3/01: -0.8% (2/01: -1.0%)
* BLS: US Employment Cost Index for 1Q01: +1.1% (4Q00: +0.9%)
* Cal Assn of Realtors: California home sales for 3/01: +6.6% to 518,410 annual units (2/01: -4.3% to 486,310 a.u.)
* Cal Assn of Realtors: California median home sale price for 3/01: +7.4% to $262,980 (2/01: -0.5% to $244,860)
* Cal Assn of Realtors: LA County home sales for 3/01: +47.0% (2/01: -6.3%)
* Cal Assn of Realtors: LA County median home sale price for 3/01: +1.6% to $228,260 (2/01: +3.1% to $224,670)
* Census: US new durable goods orders for 3/01: +3.0% (2/01: -0.3%)
* Census: US durable goods shipments for 3/01: +0.1% (2/01: -0.9%)
* Census: US unfilled durable goods orders for 3/01: +0.9% (2/01: -0.1%)
* Census: US new home sales for 3/01: +4.2% to 1,021,000 annual units (2/01: +1.2% to 980K.a.u.)
* Census: US homeownership rate for 1Q01: 67.5% (4Q00: 67.5%)
* Census: US homeowner vacancy rate for 1Q01: 1.5% (4Q00: 1.6%)
* Census: US rental vacancy rate for 1Q01: 8.2% (4Q00: 7.8%)
* Conference Board: US Consumer Confidence Index for 4/01: 109.2 (3/01: 116.9)
* Conference Board: US Help-wanted Advertising Index for 3/01: % (2/01: %)
* Natl Assn of Realtors: US existing home sales for 3/01: +4.8% to 5.44 million annual units (2/01: -0.2% to 5.19mil.a.u.)

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