The Economic Data Global Express (e-EDGE)

v.5 n.28       Released July 9, 2001
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

G7 FINANCE MINISTERS OPTIMISTIC ABOUT GLOBAL OUTLOOK

     The finance ministers of the G7 Club of industrialized countries, meeting in Rome last weekend, admitted that the global economic slowdown has been more severe than they expected but felt that the worst may be over.  U.S. Treasury secretary Paul O'Neill, the German finance minister Hans Eichel, and the European Union's economics commissioner, Pedro Solbes, were among the optimists with respect to stronger growth in 2002.  On the other hand, U.K. finance minister, Gordon Brown, sounded a pessimistic note to the effect that the bottom of the global slowdown may have not yet been reached.  Japan's new economic reform program received unanimous support.
     The meeting was, to some extent, a prelude to the G7 heads of state summit scheduled for July 20-22 in Genoa.  This could be less harmonious for the following reasons: (1) trade disputes between the U.S. and the EU have escalated recently; (2) the European Central Bank's policy stand against reducing interest rates to spur economic growth is likely to come under attack; and (3) the steep plunge in the currencies of Argentina and Turkey last week served as a reminder that the international financial system is subject to destabilizing random shocks.
     While we generally agree with the upbeat views of the G7 ministers, the global economic and financial situation remains fragile and risky. Confidence for 2002 may not develop a more solid footing until the beginning of next year, when U.S. economic momentum hopefully picks up.  (Ken Ackbarali)
 

LABOR MARKETS WEAKENED FURTHER IN JUNE

     Friday's Employment Situation report for June, released by the Bureau of Labor Statistics, revealed that U.S. labor markets continued to deteriorate last month.  The nation's unemployment rate, which had unexpectedly declined to 4.4% in May, returned to its previous 4.5% in June.   Jobless rates for the important subgroups also changed little in June, mostly returning to or near their April levels.  One good thing to be said about this three-month period of relative stability is that it's better than the previous five months, when the jobless rate marched steadily upward from its October low of 3.9%.  However, this stability looks a little suspicious.  The U.S. labor force, the denominator of the unemployment rate, has shrunk over the past three months while the size of the working-age population was rising.  The nation's jobless rate likely will jump up when labor force growth resumes.
     The BLS employer survey for June gave even less cause for optimism.  Total nonfarm employment fell by 114,000 jobs during June and was down by 271,000, or 0.2%, from its peak in March.  The large number of school and college faculty and staff taking the summer off or seeking other jobs often affects labor market reports between June and September; so the private-sector survey results probably are more reliable for these months.  Private sector payrolls dropped by 138,000 jobs in June and have fallen by 350,000 positions, or 0.3%, since March.
     Manufacturing continued to be the biggest source of weakness in the employer survey and in the economy at large.  Manufacturing payrolls fell by 113,000 jobs in June, their eleventh consecutive down month.  Job counts in manufacturing plants have dropped by 244,000, or 1.9%, just since March.  Declining payrolls have been widespread across manufacturing industries in recent months.  However, employment in several high technology equipment industries has been dropping especially rapidly.  Altogether, manufacturers of computers & office equipment, semiconductors & electronic components, and instruments let 29,000 workers go in June, for a monthly decline of 1.5%, and have dropped 69,000 employees, or 3.6%, from their payrolls since March.  Not a good sign for tech-heavy California.
     The nation's service sector still was growing in June, but the rate of growth has slowed markedly in recent months.  The main factor in the overall service-industry slowdown has been shrinking demand for temporary workers, many of who worked in manufacturing plants.  Employment at help supply houses fell by 26,000 positions between May and June and was down by 125,000 jobs, or 3.8%, from March.  The health services industries were the biggest plus factor, up by 38,000 jobs month-to-month and by 73,000 positions since March.  (Nancy D. Sidhu)
PR: http://www.bls.gov/news.release/empsit.nr0.htm
 

APRIL TRADE VALUES DISAPPOINTING

     The April report on international trade values reflected the multiple economic woes currently at work.  At the Los Angeles Customs District, exports dropped by 11.7% over the year, while import values dipped by 3.5%.  For the month, total two-way trade values at Los Angeles were down by 6.3% over last April to $17.2 billion.  The 4-month 2001 total is $70.8 billion, up just 2.2% or last year.  The April numbers were even grimmer at the San Francisco District.  Exports slid 18.9%, while imports were down by 16.2%.  The April two-way trade total was down by 17.5% to $8.3 billion.  The 4-month total for the San Francisco District was $37.8 billion, off by 1.0% from last year.  At the San Diego District, exports managed a 2.9% gain in April, but import values were down by 7.0%.  The month's total eased by 3.5% to $2.7 billion, while the 4-month total was up just 0.4% to $10.7 billion.
     How is Los Angeles doing in comparison with the New York Customs District?  At the 4-month mark, New York is solidly in the lead with a value of $76.8 billion, an 8.9% gain over the like period of 2000.   While the woes of Asia and the tech sector are hitting Los Angeles, New York is sailing along, though no doubt concerned over slowing European economies.  (Jack Kyser)
 

HOMEBUILDING UP AGAIN IN MAY, SOMEWHAT

     The May report from the Construction Industry Research Board (CIRB) contained somewhat cheerier news, at least on housing.  The number of permits issued for new housing units in the state was up over last year, with the 5-month total ahead by 7.4%.  In Los Angeles County, the number of units permitted in May was also ahead of last year, with the 5-month total up by 23.7%.  In Orange County, new homebuilding continued to struggle, with the May count below last year and the year-to-date total down by 30.9%.  The Riverside-San Bernardino area was up over the year, and its 5-month total was ahead by 25.6% for a state-leading count of 10,959.  San Diego also saw a bump up in May permits, but its 5-month total was up a modest 1.8%.  Ventura County saw a year over year increase in May permits too, and its 5-month total was up by 8.0%.
     To the north, the May housing numbers were more somber.  The Oakland area's May permit count was below last year's, while its 5-month total was down by 10.3%.  It was the same story in the San Francisco area, with the 5-month total down by 13.2%.  The San Jose area managed an increase over the year in May permits, but its year-to-date total was down by 8.9%.  (Jack Kyser)
 

NONRESIDENTIAL CONSTRUCTION TRENDS MIXED IN MAY

     The CIRB's May report on nonresidential construction was mixed.  In Los Angeles County, the 5-month totals for industrial and retail buildings were down, by 34.9% and 27.9% respectively.  Office permit valuations were up by 407.2%, however.  In Orange County, office and retail were off, by 41.6% and 31.4%, but industrial was up 185.0%.  In the Riverside-San Bernardino area, industrial and retail permits values were down by 44.1% and 41.3% respectively (but lots of retail projects are in the planning stage).  In San Diego County at the 5 month mark, all sectors were off -- industrial -43.9%, office -29.4% and retail -50.2%.  In Ventura County, industrial permit values lagged (-18.8%), but office was up by 124.0% and retail by 113.6%, both on small bases.
     While the "R" word is being bandied about for the Bay Area, hope is obviously springing eternal.  Industrial permit values were up by 3.7% (Santa Clara County is the leader of this pack), office was ahead by 88.5% (San Mateo and Santa Clara County), while retail was ahead by 47.6% (Santa Clara County again).  (Jack Kyser)
 

LOTS OF HOLLYWOOD NEWS

     The good news is that the Screen Actors Guild and the studios reached a contract agreement late Tuesday the 3rd.  The bad news is that strike fears have distorted production schedules for the year.  For example, the "Hollywood Reporter's" latest "production at a glance" feature reveals that at week 27, 59 features are in preparation, compared with 88 in 2000 and 127 in 1999.  Industry experts say that it will be fall before things become more normal.
     June data from the Entertainment Industry Development Corporation on off-lot production activity reported a 7.0% increase in production days over the year.  Features were ahead by 21.2% and TV was up 16.8%.  And commercial production showed some life, with a 22.0% increase over the year.  However, music was down by 64.6%, with some speculation that last year's permit number was distorted by some commercials masquerading as music videos (there hasn't been much singing and dancing product lately).  (Jack Kyser)
 

WEEKLY ENERGY NOTES

  Supply:

     - Another new power plant officially started up last week.  Owned and operated by Calpine, this plant has a 540 MW capacity, enough to supply the electricity needs of over 400,000 homes.

  Refund & Payment Negotiations:

     - The overcharge settlement negotiations continue in Washington D.C. between the State, investor-owned utilities (PG&E, SCE, and SDG&E), power generators, and other interested parties.  If a settlement is not reached by today, FERC's Administrative Law Judge Curtis Wagner will issue a refund recommendation of his own and submit it for FERC approval.  Stay tuned.
     - California has apparently changed its stance on the refund negotiation and is now offering a reduction in the $9 billion refunds sought in exchange for renegotiations of the long-term contracts it signed with suppliers earlier this year (worth $43 billion).  Potential savings from renegotiations will be far greater than what the State can expect to get from the refund negotiations.
     - State Controller K. Connell released details of power contracts negotiated between the State and electric power generators.  The details include the length of contracts and more importantly, the rates to be paid by the State.  Recent wholesale power rates have been below the long-term rates that it negotiated earlier, and political sparks are flying over those contracts and the real long-term costs to the State and taxpayers.  (SacBee news article: http://www.sacbee.com/news/special/power/070301details.html )
     - Duke Energy reduced California's outstanding power bills by $20 million, as ordered by the Federal Energy Regulatory Commission (FERC).

  Price Control:

     - The state tested its new energy alert and price cap systems last week with mixed results.  Unexpectedly hot weather caused the California Independent System Operator (ISO) to declare power emergencies on Monday and Tuesday, warning that blackouts were possible and triggering the new variable price caps mandated by FERC.  In the event, no blackouts occurred, but there was some confusion about the maximum prices generators could charge while the alerts were in force.  Each time it declares an emergency alert, the ISO is supposed to re-calculate the price caps, which depend partly on the price of natural gas.  Natural gas prices have been falling lately, and many out-of-state generators withheld power from California until they learned what price they would receive.  Hopefully, the ISO will do its calculations earlier next time hot weather threatens.
(Compiled by Nancy D. Sidhu & George Huang)
 

WHAT'S GOING ON IN D.C.?

     If you need to keep up with what's going on in D.C. that's relevant to California, you will want to subscribe to California Institute for Federal Policy Research's bulletins.  Please visit http://www.calinst.org for more information.
 

QUICK STATS:

* BLS: US unemployment rate for 6/01: 4.5% (5/01: 4.4%)
* BLS: US employment for 6/01: -114,000 (5/01: +8,000)
* Census: US new factory orders for 5/01: +2.5% (4/01: -3.4%)
* Census: US factory shipments for 5/01: +2.6% (4/01: -2.4%)
* Census: US unfilled factory orders for 5/01: -0.7% (4/01: -0.6%)
* Census: US factory inventories for 5/01: -0.3% (4/01: -0.2%)
* Federal Reserve: US consumer credit for 5/01: +4.9% (4/01: +10.5%)


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