The Economic Data Global Express (e-EDGE)

v.5 n.23       Released June 4, 2001
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

LABOR MARKETS STILL WEAK IN MAY

     Friday's Employment Situation report for May, released by the Bureau of Labor Statistics, contained some brand new numbers but was mostly more of the same.  The nation's unemployment rate unexpectedly edged down to 4.4% last month from 4.5% in April and 4.3% in March.   Unemployment rates for all of the important subgroups declined.  Look beneath the headline numbers, however, and you'll find some statistical noise.  The working age population increased between April and May, but the labor force and employment both plunged.  Yet the number of unemployed workers still dropped.  In the past, this survey has been known to report similarly untoward results during the summer months; so it may be some time before we get a clear picture of what's really happening.
     The BLS employer survey for May reported that total nonfarm employment fell by 19,000 jobs during May after plunging by a revised 182,000 jobs in April and growing by 59,000 workers in March.  The government has revised economic history again, this time back through 1996.  The revisions added over 400,000 to the nation's total job count but preserved much of the lackluster employment trend seen in late 2000-2001.  In particular, the new figures show that U.S. manufacturing industries--which accounted for more than last month's entire decline in payrolls--have lost 614,000 jobs over the past year, a 3.3% decline.  Almost every manufacturing industry dropped workers in the month of May, and most have shrunk compared to last year.  The biggest year-to-year losses in percentage terms were textiles & apparel, down by 10%, and automotive, down by almost 9%.
     The ranks of temporary workers, many of whom went to work in manufacturing plants, also dropped by about 9% from May 2000.  Interestingly, these same help supply services firms actually added 1,000 workers last month.  This might be an early sign that manufacturing is nearing bottom, but it's much too early to tell for sure.  Significant industry employment increases for May came in services (up over the month by 42,000 jobs), construction (up over the month by 31,000 jobs), and FIRE (finance, insurance and real estate, up by 26,000 positions). Still not much fuel for an economy to grow on.  Despite the slightly lower jobless rate, labor market conditions in May appeared just as weak as they were in April.  (Nancy D. Sidhu)
PR: http://www.bls.gov/news.release/empsit.nr0.htm
 

MANUFACTURING STILL IN RECESSION

     The monthly survey of purchasing managers by the National Association of Purchasing Management shows that the manufacturing sector continued to weaken during the month of May.  The Purchasing Managers' Index (PMI) declined to 42.1% from 43.2% in April and it was the tenth consecutive month of contraction (PMI<50%).  The bad news was nearly across the board, although the continuing decline in inventories shows that the inventory correction process is working as expected.  The price index has also been in negative territory (<50%) for three consecutive months, and this should lessen some inflation worries.
     Manufacturers in California also have to face the energy crisis on top of the national economic slowdown.  The State will see a hit to its industries' competitiveness in the short run, but some innovative responses are showing up.  (George Huang)
PR: http://www.napm.org/NAPMReport/ROB062001.cfm
 

AVERAGE HOURS WORKED IN MANUFACTURING

     This is an indicator that we keep an eye on, as it provides interesting insights into business activity.  In California, average hours worked per week in manufacturing in April were down to 40.4.  The last time they were this low was April 1995, when the state's economy was still struggling to regain its footing.  Overtime hours worked are also coming down.  In April, the reading was 3.7 hours per week, the lowest level since January 1994.  In Los Angeles County, average hours worked per week in manufacturing in April were 41.5, the lowest level since July 1995.  Like the rest of the nation, manufacturing in California and Southern California is encountering rough weather.  (Jack Kyser)
 

ECONOMICS PROFESSOR JOINS BUSH INTERNATIONAL TEAM

     Professor John Taylor of Stanford University, one of the country's most highly regarded economists, was appointed last week to the post of Undersecretary of the Treasury for international finance.  This office was held by Laurence Summers before he succeeded Robert Rubin as Treasury Secretary in the last administration.  Mr. Taylor could be instrumental in strengthening and clarifying the Bush Administration's policies in the international economic arena, and thus reversing the charges of ambiguity and floundering.  If he succeeds in influencing the President, Treasury Secretary Paul O'Neill, and Congressional leaders, American prestige and effectiveness in the international sphere is likely to be enhanced.
     Taylor's policy positions may be considered by some as activist and aggressive.  He is in favor of nudging Japan and the European Union towards more monetary stimulation of their economies.  He strongly believes that the Japanese government should insist that the country's banks work out their nonperforming loans more quickly.  He supports a strong American role in the International Monetary Fund and in regional development banks.
     This new appointment could not be better timed from the standpoint of the global economy.  Slower economic growth prospects are likely to plague both industrialized  and developing countries this year and next.  In fact, there is a Pandora's Box of economic troubles lying in wait in Latin America and Asia. Mr. Taylor could be a vital force in helping America's trading partners understand the reasoned use of appropriate economic policies to change undesirable outcomes.  There is no question that his expertise is needed at this time, and we applaud his acceptance of this challenge as well as Administration officials who selected him.  (Ken Ackbarali)
 

RESIDENTIAL CONSTRUCTION GENERALLY STRONG IN APRIL

     The Construction Industry Research Board's April report pointed to a still active homebuilding sector.  For the state as a whole, housing unit permits issued were up over the month and year.  For 4 months of 2001, the permit total was up by 8.5% over the comparable 2000 period.  In Los Angeles County, the number of permits issued in April was down from the previous month, but up over the year.   The County's 4-month permit total was up 24.9% over the like 2000 period, to 7,340 units (good for a 2nd place ranking among the state's metro areas).
     The April permit total for Orange County was also down from the previous month but up over April of last year.  However, the 4-month total of 2,611 units was down by 31.0% from last year.  It was the same pattern in the Riverside-San Bernardino area, but its 4-month total of 8,394 units was up by 28.3% over last year (and good for a 1st place ranking in California).  San Diego County's April housing permits were up from March, but down from April of 2000.  San Diego's 4-month total of 5,378 units was 4.2% behind last year (but still good for a 4th place position).   In Ventura County, the April permit total was down from March, but up (modestly) over the year.  And the 4-month permit total was off just a smidgen (-0.8%) from last year.
     In the Bay Area, Oakland's April new housing unit count was down over both the month and year.  Its 4-month total lagged last year's by 4.7%.  The San Francisco area's permit count was up over both March and last year, but the 4- month total here is off by 7.2%.  April housing permits in the San Jose area were down from March and last April.  And its 4-month total was off by 12.1%.  (Jack Kyser)
 

NONRESIDENTIAL CONSTRUCTION ACTIVITY IN APRIL -- RESTRAINT AND MADNESS

     As to nonresidential building permits, the April report from the Construction Industry Research Board was fascinating.   In Southern California, activity was generally off from last year, but in the Bay Area, development activity was up.  Given the tech industry's problems, this seems somewhat counter-intuitive.
     In Los Angeles County, industrial permit valuation through April were down over the year by 36.5%, while retail was off 4.3%.  New office permits soared 279.0%.  One of the projects was heavily preleased, however.  In Orange County, office permits for the first 4 months of the year were down by 55.2%, while retail permits were off by 23.7%.  Industrial permit valuations in Orange County, however, were ahead 103.5%, but to a relatively modest $25.9 million.  Restraint is definitely the order of the day in the industrial market in the Riverside-San Bernardino area, with permit values down by 42.6%.  Retail permits were also off by 32.2%.  New office construction in the area to date in 2001 was up by 44.0%, but the actual value was a modest $24.2 million.
     In San Diego County, the 4-month totals were down across the board, with industrial off 29.5%, office down by 16.0%, and retail off 72.5%.  In Ventura County, industrial activity was off by 11.9%, but office permit values were up 352.6% (to $24.5 million), and in retail the 2001 increase was too big to accurately calculate.
     Now we get to the madness.  In the 9-county Bay Area, industrial building permit values were up by 58.9%, office was ahead by 193.5%, and retail was up by 41.4%.  In their analysis, the Research Board highlights large projects during the month, and 6 of 7 large permits issued during April were in Contra Costa and Santa Clara Counties.  Oh my!  (Jack Kyser)
 

CONSERVATION EFFORTS PAYING OFF

     California's electricity usage in May was 11% lower than in the same month last year, according to State officials.  Californians also managed to cut 10.4% of electricity used during the peak periods when it matters the most.  Many businesses, especially retailers, are discovering that reduced lighting or A/C has little or no negative impact on their businesses.  Now you can get a 20% rebate on your power bill if you cut power use by 20% (as compared to the same period last year).  For many people, it may be as simple as turning off the 2nd fridge, raising the thermostat by a few degrees, or reducing the pool cleaning time to one hour (and don't forget to run it after midnight).  (George Huang)
     LAEDC released its mini-report on "The Causes of California's Electric Power Crisis" last week.  This concise report explains the causes of the crisis with graphs and narratives.  Understanding the causes will help you see why many of the proposed "solutions" just won't work and why you need to conserve energy (which is, unfortunately, one of the very few things that are under your control).  You may purchase this report for $15 by calling 213-236-4822.
     The updated residential electricity rate calculation spreadsheet (for SCE customers) will be removed next week.  Download your copy today: http://www.laedc.org/ee-v5n21/SCE-rate.xls
News: http://www0.mercurycenter.com/partners/docs1/009688.htm
 

MINORITY BUSINESS REPORT: ASIAN-AMERICANS

     The Census Bureau released its report on Asian- and Pacific Islander-owned (API) business enterprises (part of the 1997 Economic Census). There were 912,960 API businesses in the U.S. in 1997.  Among the states, California topped the list with 316,048, followed by New York at 123,258 and Texas at 60,226.  API businesses represent 12% of all firms in California.  Locally, LA County came in first in the nation with 114,462 API businesses (New York PMSA was no. 2 at 101,814 and Orange County was third at 44,840).  L.A.'s 114,462 firms generated $55 billion in sales.  Most API businesses are family-run (with no reported employees) or single-person operations.  Only 37,596 had paid employees, but they employed a total of 309,469 workers.  Firms with employees were roughly 33% of the number of firms, but accounted for 91% of the sales.  Roughly 43.5% of the API businesses in LA County were in services.  The cities in LA County with the largest numbers of API businesses were: Los Angeles (43,154), Alhambra (4,102), and Monterey Park (3,639).  (George Huang)
PR: http://www.census.gov/csd/mwb/

QUICK STATS:

* BLS: US unemployment rate for 5/01: 4.4% (4/01: 4.5%)
* BLS: US nonfarm employment for 5/01: -19,000 (4/01: -182,000)
* Conference Board: US help-wanted advertising index for 4/01: 65% (3/01: 67%)
* Dept. of Agriculture: US agricultural prices for 5/01: +1.9% (4/01: +2.9%)
* Census: US construction spending for 4/01: +0.3% (3/01: +1.1%)
* Natl Assn of Purchasing Mgmt: US manufacturing Purchasing Managers' Index for 5/01: 42.1% (4/01: 43.2%)

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