The Economic Data Global Express (e-EDGE)

v.5 n.37       Released Sept. 10, 2001
This issue of e-EDGE is sponsored by the EDDY Awards, Wednesday, Nov. 14.  This year's honorees: Dr. David Baltimore (CalTech) and Hon. Michael D. Antonovich (LA County Supervisor and Mayor)
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

U.S. LABOR MARKET DETERIORATED IN AUGUST

     The Bureau of Labor Statistics released its monthly labor market report last Friday and the results weren't pretty.  The U.S. unemployment rate surged unexpectedly to 4.9%, the highest level since October 1997, after spending the past four months in the 4.5% range.  The jobless rate was only 4.1% in August 2000.  Dismal numbers were strewn liberally throughout last month's report.  Unemployment rates for all of the major groups increased.  Adult women registered the "least bad" performance; their jobless rate rose by 0.3 percentage points to 4.2% in August.  Joblessness among black workers jumped by 1.2 percentage points to 9.1%. And the teenage unemployment rate soared by 1.3 percentage points to 16.1%.
     The nation's labor force statistics are based on a survey of only 50,000 households, so they can (and do!) jump around from one month to the next, especially in the summertime.  During August, the nation's labor force (composed of people who are working or looking for a job) shrank by 424,000 persons, the number of employed persons dropped by 986,000, and the number of unemployed rose by 562,000.  Meanwhile, the number of working-age people NOT in the labor force surged by 638,000.  All of these changes are much larger than usual.  Part of the story, but only part, reflects the larger-than-normal number of teenagers who dropped out of the labor force in August.  Many of the "dropouts" presumably decided to return to school rather than try to make it in today's cold, hard economy, repeating a phenomenon seen in previous recessions.
     The BLS employer survey for August also made for gloomy reading.  Nonfarm employment dropped by 113,000 persons in August, after a revised increase of 13,000 positions in July.  Manufacturing, as usual, was the culprit, with payrolls shrinking by 141,000 jobs.  Employment counts fell in virtually all sectors of manufacturing last month.  The biggest losers were industrial machinery (which includes computers & peripherals), down by 25,000 jobs, electronic/electrical equipment, down by 19,000 jobs, apparel, down by 20,000 jobs, and furniture, down by 10,000 jobs.  Most of the gainers were in the services industries, especially social and health services, up by 33,000 and 32,000 jobs respectively.  Federal and state government employment edged down in August, but local government employment rose, mostly teachers returning to their classrooms.
     What to make of all this?  It's pretty clear that the summertime gremlins were busy playing with the Labor Department's seasonal adjustment process in August.  Still, collateral evidence suggests a properly tuned process would generate a higher national unemployment rate in August than, say, last April.  In particular, the "insured unemployment rate" of people claiming state unemployment insurance benefits rose steadily from 2.1% in April to 2.5% in August.  (Maybe the Department's adjustments for May through July were off and August was on target?)  In any event, summertime statistical problems will be over this month or next.  Then maybe we can judge what's really going on.  (Nancy D. Sidhu)
PR: http://www.bls.gov/news.release/empsit.nr0.htm
 

JAPAN'S ECONOMIC SITUATION JUST KEEPS GETTING WORSE

     Evidence of the Japanese economy sinking into a recession mounted last week with the release of GDP for the second quarter of 2001.  A decline of 3.2% at an annualized rate was recorded for the second quarter, following a small 0.5% increase in the first quarter of this year.  The weakness was across the board -- business investment in plant and equipment decreased, exports fell, government spending declined, and consumer spending was virtually flat.
     Fears are now escalating over Prime Minister Koizumi's reform plans to curb public spending, strengthen the banking system, and restructure the corporate sector.  With unemployment already at a postwar high of 5%, these measures are likely to add to the jobless rolls and destabilize the government.  To deal with rising unemployment, Mr. Koizumi is considering a $16.8 billion spending program, which represents a departure from earlier policy announcements.
     To make matters worse, greater attention has been focused on Japanese banks.  The International Monetary Fund's offer to monitor the banking system has been rebuffed by Japanese officials.  Also, Goldman Sachs, an American investment bank, has cast serious doubts over the official Japanese estimates of bad loans -- indicating that the number  could be close to $1.4 trillion or seven times bigger.
     Given the overall global economic weakness -- U.S., EU, Latin America, and Asia, external stimulus cannot be expected to bail out Japan in the months ahead.  The near-term situation looks grim indeed.  (Ken Ackbarali)
 

TRADE VALUES UGLY IN JUNE

     The June data on export and import values at the State's three customs districts were, to be frank, pretty ugly.  At the Los Angeles District, export values dropped by 9.5% over the year, while import values dipped by 6.2%.  Total two-way trade value for the month was off by 7.3%, and the 6-months total of $105.6 billion was behind last year by 1.3%.
     Things were even worse at the San Francisco District in June.  Export values skidded by 24.8%, while import values dropped by 27.4% (the 3rd month in a row of double-digit declines).  The month's total was down 26.2% over the year, another reflection of the tech sector's problems.  The 6-month total at $54.0 billion was off by 8.3%.  At the San Diego District, export values eased during June by 8.2%, while imports were down by 12.6%.  The month's total was down over the year by 11.0%, and the 6-month total of $16.5 billion is off 1.3%.
     How did Los Angeles do versus New York for the first 6 months of 2001?  The latter is still ahead with a two-way trade value of $114.0 billion.  (Jack Kyser)
 

AUGUST LOCATION PRODUCTION DAYS DOWN

     According to the Entertainment Industry Development Corporation, location (off-lot) film production days in August were 8.2% below the year-ago level.  This decline reflects the ongoing slow down in feature film production in Hollywood.  According to the "Hollywood Reporter," just 7 features are currently in production by 12 major film distributors.  Feature film production days were 49.9% below last year, while TV was down by 16.2%.  There were spurts, however, in commercial location days (+125.1%) and music (+116.8%).
     Domestic box office, on the other hand, is doing quite well, up by 9.8% to-date over last year.  And if you like irony, the Screen Actor's Guild is threatened with a strike by some of its staff who are members of the Teamster's union.  (Jack Kyser)
Data: http://www.eidc.com/Coverage/Production_Data/Shooting_Days/shooting_days.html
 

WEEKLY ENERGY NOTES

      The LA Times reported that according to an independent audit, the City of L.A.'s Dept. of Water & Power (LADWP) made on average 29% profit on its power sales to the State, nearly double the 15% profit ceiling supposedly set by its former general manager S. David Freeman, who is now the head of State's power authority.  What the headline fails to discuss is the proper way of comparing and calculating this "profit margin."  A fair comparison would be to use the additional cost of fuel (including the additional higher costs of fuel for the power generated for LA's own uses), other marginal expenses and a proportional share of capital depreciation as the "costs" in the profit calculations.  In effect, one should compare LADWP's costs with what its costs would have been had it not produced additional power and sold it to the state, and use that difference as the basis of profit calculations.  The use of average costs is unfair to the LADWP and its customers, many of whom conserved power so there would be more surplus power to help out their neighbors.  It is not surprising that LADWP's costs (and hence its bid prices) are higher than most private generators, and accusations of excessive profits without considering these factors are misleading.  (George Huang)
LA Times article: http://www.latimes.com/news/local/la-091001dwp.story
 

QUICK STATS:

* BLS: US unemployment rate for 8/01: 4.9% (7/01: 4.5%)
* BLS: US nonfarm employment for 8/01: -113,000 (7/01: +13,000)
* BLS: US nonfarm labor productivity for 2Q01: +2.1% (1Q01: +0.1%)
* BLS: US nonfarm unit labor costs for 2Q01: +2.7% (1Q01: +5.0%)
* BLS: US labor productivity for 2Q01: +% (1Q01: +%)
* BLS: US labor productivity for 2Q01: +% (1Q01: +%)
* Census: US wholesale trade for 7/01: +0.6% (6/01: -1.1%)
* Census: US wholesale inventories for 7/01: -0.7% (6/01: -0.4%)
* Cal Assn of Realtors: California Housing Affordability Index for 7/01: 32% (6/01: 32%)
* Cal Assn of Realtors: LA County Housing Affordability Index for 7/01: 35% (6/01: 35%)

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