The Economic Data Global Express (e-EDGE)

v.5 n.19       Released May 7, 2001
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

LABOR MARKETS WEAKENED FURTHER IN APRIL

     Friday's Employment Situation report for April, released by the Bureau of Labor Statistics, makes for some pretty depressing reading.  The nation's unemployment rate rose to 4.5% from 4.3% in March and 4.2% in February.   Unemployment rates for all of the important subgroups increased last month except for blacks, whose jobless rate declined from 8.6% to 8.2%.  The total number of unemployed has grown to 6.4 million persons, an increase of about 750,000 since December.
     More disheartening news:  as layoffs have mounted, the number of newly unemployed (those out of work for less than 5 weeks) surged by 518,000 persons to almost 3 million in April.  "Job losers" accounted for 49.9% of last month's unemployed, up from 44.7% in December.  Not surprisingly, given today's uncertain economic conditions, the share of "job leavers" has dropped from 13.3% to 11.7% over the same time period.  Joblessness rose for all educational categories over the past 4 months.  However, the biggest increase, 0.7 percentage point, was experienced by college graduates, with an unemployment rate of 2.3% in April.  Dot.commers?
     The BLS employer survey for April was just as gloomy.  Total nonfarm employment plunged by 223,000 jobs during April, compared to a revised decline of 53,000 in March and an increase of 136,000 workers in February.  Manufacturing employment took a big hit, falling by 104,000 workers in April, for the 9th consecutive monthly decline.  The ranks of temporary workers, many of whom were placed in manufacturing plants, also lost 108,000 positions last month.  Many industries reported job losses in April.  The only increases came in government (up by 38,000 jobs), retail (up by 22,000 workers), and FIRE (finance, insurance and real estate, up by 8,000 positions).
     Labor market conditions in April were substantially worse than in previous months; so much so that many unfavorable historical comparisons can and are being made.  For example, April's decline in nonfarm jobs is the biggest since February 1991, near the bottom of the 1990-91 recession.  And another:  the all-industry diffusion index (the percent of industries reporting higher employment) was only 41.9% in April, below the level seen at the start of the 1990-91 recession.  More comparisons are sure to come.  The level of new claims for unemployment insurance, which is reported on a weekly basis, topped 400,000 in the two weeks immediately after the April labor market survey.  New claims haven't been this high since 1992, just after the 1990-91 recession ended.  (Nancy D. Sidhu)
PR: http://www.bls.gov/news.release/empsit.nr0.htm
 

OECD FORECAST RELATIVELY OPTIMISTIC FOR GLOBAL EXPANSION

     The highly-respected Organization for Economic Cooperation and Development (OECD) report on the economies of its 30-member club of industrialized economies, released last week, may be optimistic on two fronts.  The first is that the U.S. economic slowdown will last only six months, i.e. the first half of 2001.  The second is that stronger economic growth will occur in the U.S. and globally in 2002.  If this forecast proves to be on target, it will represent excellent news for investors, consumers, employers, and workers.  The OECD does not expect a global recession this year, but instead its report strongly suggests that the global economy is more likely to experience only a brief and mild interruption of the strong economic expansion that followed the 1997 Asian Crisis.
     Highlights of the OECD report are:
- U.S. economic growth (GDP) for 2001was revised downward from 3.5% to 1.7% and a 3.0% increase is predicted for 2002.
- GDP growth in the Euro-11 region for 2001 was lowered slightly to 2.6% from 3.1%.  For 2002, recovery would boost the rate of growth only slightly to 2.7%.
- The outlook for Japan was described as "faltering and at risk of entering a downward spiral."
     The OECD expects monetary authorities in both the U.S. and Europe to cut interest rates further, but the Bank of Japan is presumed to have no room for additional interest rate cuts. Since the Euro-11's exports to the U.S. represent only 8% of its total exports, the impact of any worsening of the U.S. slowdown on the Euro-11 is seen as somewhat muted.  By contrast, other countries are considerably more vulnerable to American prospects, based on the share of their exports that are destined for U.S. markets--Mexico 70%, Canada 65%, Japan 23%, and South Korea 15%.
     We share the concerns of the OECD over two of the many risks to their forecast, i.e. further significant declines in U.S. stock markets and continued increases in household debt.  Both of these risk factors will warrant close monitoring in the months ahead.  (Ken Ackbarali)
OECD PR: http://www.oecd.org/eco/out/eo.htm
 

NEW HOMEBUILDING MIXED IN MARCH

     There was no consistent trend visible in the March housing unit permit data compiled by the Construction Industry Research Board.  For California, the total number of units permitted increased from February to March, but was down over the year.  For the first 3 months of 2001, total units permitted were 6.9% ahead of the like 2000 period.   A similar trend was in evidence in Los Angeles County, with 2001's 3-month total up a stout 27.2%, thanks to a strong January.  Orange County repeated this trend, but its 3-month housing unit total is lagged last year's count by 41.4%.
     However, the Riverside-San Bernardino area's permit total was up over both the month and year.  Its 3-month total is running 18.2% ahead of 2000.  Ventura County also posted gains over the month and year, but the 3-month total was 6.4% behind last year.  San Diego County's March permit total was down over both the month and year, and its 3-month total is lagged last year's count by 2.6%.
     In the Bay Area in March, the San Francisco metro area saw housing permits decline over both the month and year, with the  3-month total 7.3% behind 2000.  In the Oakland area, permits increased over the month but were down from March of 2000.  Interestingly, its 3-month permit total was also down by 7.3%.  In the San Jose area, the number of units permitted declined from February to March, but the latter was above the March 2000 total.  The 3-month unit count lagged last year's by 9.5%.  (Jack Kyser)
 

NONRESIDENTIAL ACTIVITY ALSO TRENDLESS IN MARCH

     Industrial building permit valuations in Los Angeles County for the first 3 months of 2001 are running a modest 2.7% ahead of the like 2000 period.  However, office activity was up a whopping 281.8%, thanks to two large projects.  Retail permit valuations in Los Angeles were 10.4% behind last year, a welcome sign of restraint.  In Orange County, the 3-month industrial permit total was up a lofty 144.9% over the like 2000 period, but office activity was down by 66.4% and retail is off 36.0%.  Restraint was the word of the month in the Riverside-San Bernardino area, with industrial permit valuations down 37.0% over the year.  Retail was also off, by 41.7%, but office permits for 3-months were up 67.4%, but on a small base.
     The March nonresidential data for San Diego County revealed that the office sector was up by 18.5%, but industrial trailed last year's total by 39.3% while retail was down by 69.4%.  However, the news was all up beat in Ventura county, with the 3-month totals for industrial up 3.5%, and the year-over-year gains in office and retail that were too big to compute due to the comparatively high volumes this year.
     For those interested in the 9-county Bay area, the March numbers suggest reaching for a Tums.  Industrial permit values for 3-months were up by 86.6%, thanks to a boom in the San Jose area, while office values were up a thumping 178.4% with Alameda, San Francisco and Santa Clara all seeing big increases.  Even retail permit valuations were running ahead of last year, by 51.1%, with the San Jose area up by 69.2%.  If tech is having problems, why all this action, and who will fill the new space?  (Jack Kyser)
 

DOLLARS AND SENSE ON GASOLINE PRICES

     Reuters reports today that the American Automobile Association (AAA) is calling for "a better national energy policy and the suspension of some cleaner-burning fuel regulations in the case of fuel shortages this summer".  AAA cites today's "all time high" average retail price of $1.68 per gallon for regular gasoline in U.S. to support their position.  Their assertions about U.S. energy policy may well be valid, but their economic data are misleading because they have not been adjusted for inflation.
     While gasoline prices have risen sharply in recent weeks, they are nowhere near their all time high.  Inflation-adjusted to 1999 dollars, the average price of gasoline has peaked at more than $2.50 per gallon twice in our nation's history.  The first peak, 1918-1922, came before widespread use of the automobile brought economies of scale and eventually lower prices to gasoline distribution.  The second peak followed the second energy shock in 1978.  Prices stayed high through 1980 before beginning a rapid decline.  The lowest average price, $1.01 per gallon, came just two years ago in February, 1999.  Today's prices are similar to those that prevailed in the 1950s and 60s: $1.68 today is equivalent to $0.24 in 1950 dollars and $0.29 in 1960 dollars.
     The price of gas may yet be cause for concern.  The Federal Reserve is clearly concerned that consumer and business purchases of all kinds of goods and services could be depressed by currently high energy prices.  For now, however, we would do well to note that gasoline prices typically rise at the start of the summer driving season.  In real terms, current pump prices don't justify the willy-nilly repeal of regulations that helped eliminate stage-three smog alerts in Los Angeles. (Gregory Freeman)
AAA Gasoline Price Survey: http://www.aaa-calif.com/members/corpinfo/fuel/0401.asp
 

HOLLYWOOD IN A FRENZY IN APRIL

     A location production frenzy, that is.  According to the Entertainment Industry Development Corporation, location production days in April were 31.8% above the year.  Feature film activity was up by 71.8%, and TV location production was ahead 49.3%, fueled by strike fears.  However, commercial activity was down over the year by 24.2%, a reflection of the soggy advertising market.  Year-to-date, location production days in Los Angeles are up by 20.4%, with feature films setting the pace with a 51.7% gain.  (Jack Kyser)
 

BUT HEAVES A SIGH OF RELIEF IN MAY

     On a brighter note about Hollywood, an agreement was reached between the Writers Guild and the studios late Friday, May 4th.  It will be submitted to WGA members for approval, and will hopefully provide a template for negotiations with the Screen Actors Guild.  That contract expires July 1.  (As an aside, you get the impression that the national media was disappointed that there was a settlement with the WGA, since they won't get to write those "end of L.A." stories).  (Jack Kyser)
 

AND GOOD NEWS FOR THE COMMUNITY OF HOLLYWOOD

     And there is more good news for Hollywood, the community.  The Hollywood & Highland project is scheduled for a November 8, 2001 grand opening.  This landmark project will include a permanent home for the Academy Awards ceremony, a 6-plex theater complex to complement the historic Chinese theater, and retail.  The latter element will have a DFS Galleria, Aveda, Banana Republic and Ann Taylor among others, as well as restaurants.   There will also be a 640 room Renaissance Hotel, with the entire facility sitting right on top of a MetroRail subway station.  (Jack Kyser)
 

1999 COUNTY BUSINESS PATTERNS DATA

     The Bureau of the Census has just released the 1999 County Business Patterns report.   Among the top five counties in the nation in job growth between 1998 and 1999, Orange County placed second with an increase of 56,900, San Diego County was fourth with 54,800, and Los Angeles County was fifth with 54,200 jobs.  In number of employer business establishments added, Los Angeles County was first in the nation with a net gain of 2,580 to a total of 222,513, while San Diego County was fourth with a net gain of 1,492 to 65,905, and Orange County was fifth with an increase of 1,378 to a total of 76,532.
     Of Los Angeles County's total of 222,513 business establishments, all the action between the survey dates was among the group with 1-49 employees.  It added 2,366 establishments pushing the total to 209,809 or 94.3% of the total.  The 100-499 employee group added the next largest number of firms, 182.  Interestingly the 1,000+ group added 6 establishments, pushing this total to a count of 213.  Elsewhere around Southern California, the pattern was the same.  For example, in Orange County, the total gain was 1,378 business establishments, pushing the 1999 total to 76,532.  1,158 of the increase was in the 1-49 employee segment.  (Jack Kyser)
     Note: we have prepared a summary file for you.  If you have trouble downloading the Excel spreadsheet, try the self-extracting file instead.  If you cannot open the Excel spreadsheet, get the PDF version instead.
PR: http://www.census.gov/Press-Release/www/2001/cb01-78.htm
California file (2.6MB): http://www.census.gov/prod/2001pubs/cbp99/cbp99-6.pdf
LA 5-Co. Summary (Excel 2000, 155KB): http://www.laedc.org/ee-v5n19/99CBPLA5.xls
LA 5-Co. Summary (self-extracting Excel file, 55KB): http://www.laedc.org/ee-v5n19/99CBPLA5.exe
LA 5-Co. Summary (PDF, 55KB): http://www.laedc.org/ee-v5n19/99CBPLA5.pdf
 

QUICK STATS:

* BLS: US unemployment rate for 4/01: 4.5% (3/01: 4.3%)
* BLS: US nonfarm employment for 4/01: -223,000 (3/01: -53,000)
* Natl Assn of Purchasing Mgmt: US Purchasing Manager's Index for manufacturing for 4/01: 43.2% (3/01: 43.1%)
* Census: US construction spending for 3/01: +1.3% (2/01: +0.9%)
* Census: US new factory orders for 3/01: +1.8% (2/01: -0.1%)
* Census: US unfilled factory orders for 3/01: +0.7% (2/01: -0.2%)
* Census: US factory shipments for 3/01: +0.4% (2/01: -0.4%)
* Census: US factory inventories for 3/01: -0.6% (2/01: -0.4%)
* Fed: US consumer credit for 3/01: +4.7% (2/01: +10.3%)

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