The Economic Data Global Express (e-EDGE)

v.5 n.38       Released Sept. 17, 2001
The LAEDC staff stands with all Americans in solidarity and prayer for those we have lost.  There are many relief efforts underway; please contribute.
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

GLOBAL ECONOMY AND THE U.S. AT HEIGHTENED RISK OF RECESSION

     The damage done to the U.S. economy by the terrorist attack on New York and Washington on September 11th, 2001 may turn out to be enough to push us into an outright  recession--and a global recession is now more likely.  We have been pointing out for months that the American consumer's optimistic spending and borrowing have kept the economy from collapsing.  Should consumer confidence fail to recover from the last week's tragic and disastrous shock over the next 3 to 6 months, a recession is more likely.
     Why is the timing so unfortunate?  In the past few weeks, growing evidence has surfaced to indicate that Japan has fallen into recession and the European Union's economy is weaker than we thought.  In this context, emerging markets in Asia, Latin America, Eastern/Central Europe, Africa, and the Middle-East will all suffer the effects of a simultaneous loss of momentum in the rich industrial countries.  It may just be that no region of the world will return to health until the U.S. recovers from its slump.  In the meantime, exporting one's way out of this morass is not an option.
     Some positive developments need to be noted:  (1) The Federal Reserve has cut its Federal Funds Rate by 50 basis points, to 3.00%, and has injected massive amounts of liquidity into the financial system;  (2) Congress has approved $40 billion to be spent on anti-terrorist activities and rescue efforts in New York and Washington D.C.;  and (3) Financial markets re-opened today and transactions on the New York Stock Exchange, American Stock Exchange, and NASDAQ are being cleared efficiently.
     The obvious sectors of the economy that will be hurt over the next several months are airline travel, tourism, insurance, finance, and retail.  On the optimistic side, the U.S. economy may shrink for only 6 months--negative GDP growth in the third and fourth quarters of this year.  On the pessimistic side, protracted "conventional" military engagement against terrorist groups, involving American troops on foreign ground, would devastate consumer and business confidence (oil prices up to $50/barrel) and bring about a longer and more painful recession stretching well into 2002. (Ken Ackbarali)
 

STATE/LOCAL UNEMPLOYMENT RATES IN AUGUST

     California's unemployment rate rose to 5.2% last month from 5.0% in both July and August 2000.  This is the highest unemployment level for the state since May 1999.  The state's labor force has increased by 209,000 persons, or 1.2%, over the past 12 months.  However, the number of unemployed workers has risen as well, by 55,000 persons, or 6.5%.  Over the same period, the U.S. unemployment rate increased from 4.1% to 4.9%, narrowing the gap between California and the rest of the nation.  (These figures are all adjusted to eliminate normal seasonal variation.)
     Jobless rates at the county level are not seasonally adjusted.  The usual pattern calls for the unadjusted unemployment rate to go down between July and August.  In Southern California, Los Angeles, Orange, and San Bernardino counties all followed this pattern.  Los Angeles County's jobless rate fell to 6.0% last month from 6.3% in July.  Similarly, Orange County's rate edged down to 3.1% from 3.2%, and San Bernardino's from 5.0% to 4.7%.  Joblessness increased in Riverside and Ventura counties, with the former rising to 5.8% from 5.6% in July, while the latter increased to 5.1% from 4.8%.  Compared to August 2000, last month's unemployment rates were higher in Los Angeles County, up by 0.3 percentage points from 5.6%, and Orange County up by 0.4 percentage points from 2.7%.  The other three Southern California counties registered year-to-year declines ranging from 0.4 percentage points for San Bernardino and Ventura counties to 0.8 percentage points in Riverside County.  San Diego's unemployment rate was 3.3% in August, down slightly from July's 3.4% and even with last year.
     Overall, Southern California's unemployment position has weakened a little year-to-year.  However, the downtrend in the Bay Area's position has been more severe.  The combined 8-county unemployment rate was 4.4% last month, well above the August 2000 level of 2.6%.  San Jose MSA has deteriorated the most rapidly.  Its jobless rate was 5.4% last month, almost three times the August 2000 rate of 1.9%.  Last year, Silicon Valley had the state's third lowest unemployment rate; this year it's well back, in the 32nd spot.  San Francisco MSA (which consists of Marin, San Francisco, and San Mateo counties) and Alameda/Contra Costa counties also have registered big increases in unemployment, rising by 1.7 and 1.3 percentage points respectively over the past year, to 4.0% and 4.3%.
     The Central Valley's unemployment picture has improved somewhat over the past year.  Joblessness in Sacramento MSA edged down to 3.8% last month from 3.9% in August 2000, while nearby San Joaquin County registered a 0.3 percentage point decline to 6.9%.  The other major counties showed even more improvement, with Kern County down by 1.3 points to 8.2%, and Fresno and Merced counties down by 1.6 percentage points to 10.1% and 9.3% respectively.  Imperial County has the state's highest jobless rate, 25.7%, but also registered the biggest improvement, down by 7.9 percentage points from last year's terrible 33.6%.  ((Nancy D. Sidhu)
PR: http://www.edd.ca.gov/nwsrel09.htm
Data: http://www.calmis.cahwnet.gov/file/lfmonth/cal1$pr.txt
 

NONFARM EMPLOYMENT TRENDS NOT BRIGHT IN AUGUST

     Year-over-year growth in nonfarm employment continued to weaken in August.  In the State, growth eased to 1.3% or 194,200 net new jobs.   Manufacturing continued to slide, dropping 48,900 jobs over the year.  The electronics sector lost 8,800 jobs over the year, while apparel/textiles lost 6,000.  In business services, job growth continued to slow with just 21,500 jobs added over the year.
     Los Angeles County's nonfarm job growth slowed dramatically in August, down to 0.9% or just 36,200 new jobs.  By way of contrast, in 2001's first quarter, year-over-year job growth averaged 80,900.  Slippage continued in manufacturing, down by 15,200 jobs, with 5,000 of the loss in apparel/textiles and 4,100 in aerospace.  Where's the rest of the weakness?  Retail trade was down to a gain of just 3,300 jobs, while services added only 20,100.  Holding back the latter sector were motion picture production, off by 3,900 jobs over the year (de facto strike), and business services with a measly increase of 2,800 (the Westside dot.com crash).
     Orange County's nonfarm employment advanced by 2.5% or 34,300 jobs in August.  Despite a flattening out in aerospace, the County's manufacturing sector added 1,300 jobs, while tourism (hotels and amusements) created 3,800 jobs over the year.  The Riverside-San Bernardino area's nonfarm job growth picked up in August, with an increase of 3.2% or 31,700 new jobs.  Manufacturing added 1,800, while services chipped in with 11,700 new jobs.  San Diego County's nonfarm job growth rate also picked up in August, up by 2.7% or 31,900 jobs.  However, the manufacturing sector is moving sideways.  In Ventura County, nonfarm employment was up by 1.7% or 4,600 jobs.  Its manufacturing sector is losing jobs, however.
     In the Bay Area, the August nonfarm job report was lousy reading.  In the San Francisco metro area, 14,600 net new jobs were added during the month, compared with the January gain of 52,900.  And job losses in the San Jose area accelerated, with August down by 18,300 over the year.
     The September jobs report for California will reflect the aftermath of the terrorist attack on New York, with the tourism and transportation sectors most likely to be affected.   (Jack Kyser)
 

PRODUCER PRICES ROSE SLIGHTLY

     The US Producer Price Index (PPI) for finished goods rose by 0.4% in August, following three months of declines.  Compared to a year ago, the PPI was just 2.1% higher--well within the tolerance range of the Fed.  The 1.1% increase in energy and 0.9% increase in food prices between July and August overpowered the 0.1% decline in the core PPI.  Gasoline prices rose by 8.7% in August, after a sharp drop of 17.7% in July.  A sudden drop in gasoline inventories in mid-August--particularly the reformulated gasoline (RFG)--led to the increase.  A comparison with petroleum prices under the PPI for crude goods suggests that the higher costs of gasoline are due to refinery and distribution factors.
     The PPI for intermediate goods declined by 0.4% in August and was 0.1% below the year-ago level.  The 1.0% drop in energy prices and 0.4% decline in the core PPI offset the 1.8% increase in food prices.  It was 0.1% below the year-ago level.  The PPI for crude goods dropped by 2.3% in August.  Energy prices fell by 4.4%, food prices by 0.6%, and the core PPI by 0.8%.  The PPI for crude goods was 4.1% below the year-ago level, the third consecutive month of year-over-year declines.
     Will the Sept. 11 attack affect prices significantly?  If a military conflict or civil unrest breaks out in the Persian Gulf, the supply of crude oil will be disrupted.  OPEC has pledged to keep the supply of oil "stable."  We wish them the best of luck in keeping things under control.  (George Huang)
PR: http://www.bls.gov/news.release/ppi.nr0.htm
 

HOTEL BUSINESS HOLDS UP IN JULY

     According to the July report from PKF Consulting, the hotel occupancy rate in Los Angeles County was 75.9%, up from 74.3% in June, but down from 78.2% a year-ago.  The average daily room rate was up by 2.1% to $121.54.  Four areas in the County were above the 80% level, including the Airport (88.0%), Hollywood (83.2%) and the South Bay (83.0%).  Who was number 4?  It was Valencia at a stunning 94.3% occupancy.
     Orange County posted a July hotel occupancy rate of 77.2%, down from June's 78.5% and from July 2000's 80.2%.  The average daily room rate held steady over the year at $110.41.  Two areas in the County were over the 80% level for the month, including North Orange County (81.5%) and Anaheim (81.1%).  (Jack Kyser)
 

AIRLINE PASSENGER TRAFFIC MIXED IN JULY

     Total passenger traffic at LAX in July was off by 0.9% from a year-ago, with international traffic down by 2.7%.  Air cargo tonnage at LAX was also down, by 16.2%.  Ontario International, however, posted 6.5% increase in passenger traffic over the year, but its air cargo tonnage slipped by 3.9% in July.  The Burbank-Glendale-Pasadena Airport posted a 2.6% gain over the year in passenger traffic, while John Wayne/Orange County Airport came in with a 5.1% increase.  The Palm Springs Airport was also up in July, with a 9.8% gain in passenger traffic.
     As for international air cargo tonnage at LAX in July, there was no let up in the negative trend.  Import tonnage was down by 13.8%, while exports were off by 18.8%.  Total international air cargo tonnage for the month was down by 15.9%.
Data for both the hotel and airline industries will be down dramatically in September, reflecting the interruptions in service.  (Jack Kyser)
 

INDUSTRIES IMPACTED BY THE SEPTEMBER 11 ATTACK

     Analysts are scrambling to determine what industries will be impacted by the terrorist attack and for how long.  The most obvious victim is the airline industry, which was already struggling.  Airlines are cutting back flight schedules and furloughing workers.  They will also park airplanes.  What does this mean for the Los Angeles Area?  There probably won't be many "day trips" between Los Angeles and San Francisco, due to the long check-in times, and the on-going delays at SFO.  Also, we have to watch the impact on aircraft orders, as both Boeing and Airbus do subcontracting in the region.  What about hotels and theme parks?  The former have been hurt by room and event cancellations, while the latter lost one day of business in an already slow year.  Of interest -- 56% of the visitors to the Los Angeles area arrive by car, and theme parks with a large local market should do better than parks in smaller markets.  However, international tourism will be impacted.  According to the Los Angeles Visitor & Convention Bureau, international travelers account for 22% of the visitors count but represent 30% of total spending.
     What about the movie industry?  It did OK during the past week, and it generally performs well in a soft economy.  However, it will have to do some adjusting of its content to reflect the new times.  Two major films have already been shelved due to their disaster or threat themes.  (Jack Kyser)

 

QUICK STATS:

* BEA: US current account for 2Q01: -US$106.5 billion (1Q01: -$111.8bil.)
* BLS: US export prices for 8/01: -0.2% (7/01: -0.3%)
* BLS: US import prices for 8/01: -0.1% (7/01: -1.5%)
* BLS: US Producer Price Index for finished goods for 8/01: +0.4% (7/01: -0.9%)
* BLS: US Producer Price Index for intermediate goods for 8/01: -0.4% (7/01: -1.0%)
* BLS: US Producer Price Index for crude goods 8/01: -2.3% (7/01: -5.3%)
* Cal EDD: California unemployment rate for 8/01: 5.2% (7/01: 5.0%)
* Cal EDD: California nonfarm employment for 8/01: +7,200 (7/01: -136,500)
* Cal EDD: LA County unemployment rate for 8/01: 5.6% (7/01: 5.7%)
* Cal EDD: LA County nonfarm employment for 8/01: -7,900 (7/01: -38,200)
* Census: US retail sales for 8/01: +0.3% (7/01: +0.2%)
* Census: US business sales for 7/01: +0.4% (6/01: -1.5%)
* Census: US business inventories for 7/01: -0.4% (6/01: -0.6%)
* Federal Reserve: US industrial production for 8/01: -0.8% (7/01: -0.1%)
* Federal Reserve: US industrial capacity utilization rate for 8/01: 76.2% (7/01: 76.9%)
* Federal Reserve: US consumer credit for 7/01: -0.0% (6/01: -1.8%)


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