The Economic Data Global Express (e-EDGE)

v.5 n.51       Released Dec. 17, 2001
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

STATE/LOCAL UNEMPLOYMENT RATES MIXED IN NOVEMBER

     California's unemployment rate rose to 6.0% last month from a revised 5.8% in October and 5.4% in September.  The state's jobless rate was only 4.8% in November 2000.  Still, this lackluster performance was better than the nation as a whole.  The U.S. unemployment rate has increased from 4.0% to 5.7% over the past 12 months, substantially 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.  Southern California unemployment rates were mostly flat or down a little during November.  Los Angeles County's jobless rate dropped from 6.1% to 5.9% last month.  Unemployment rates also fell in Riverside County, down from 5.9% to 5.5% in November, and Orange County, down from 3.5% to 3.4%.  San Bernardino's jobless rate was flat at 4.8%.  Only Ventura County registered higher joblessness, rising from 4.9% in October to 5.3%.  Compared to November 2000, last month's unemployment rates were noticeably higher in Orange and Los Angeles counties, up by 1.1 and 1.0 percentage points respectively.  The other three Southern California counties registered smaller year-to-year increases of 0.4 percentage points in Riverside and San Bernardino counties, and 0.6 percentage points in Ventura County.  San Diego's unemployment rate was 3.6% in November, up slightly from 3.5% in October, and higher than the 2.7% registered last year.
     Joblessness in Southern California has worsened noticeably over the past 12 months, with the combined 5-county jobless rate rising by 0.9 percentage points to 5.3% last month.  However, labor markets have deteriorated dramatically in the Bay Area, and the year-to-year margin of loss continued to widen in November.  The combined 9-county unemployment rate was 5.1% last month, 2.2 percentage points above the November 2000 level of 2.9%.  San Jose MSA had the worst performance.  Last month's jobless rate was 6.6%, over five times (!!) the November 2000 rate of 1.3%.  San Francisco MSA (which consists of Marin, San Francisco, and San Mateo counties) and Alameda/Contra Costa counties also registered big increases.  Their unemployment rates were up by 2.6 and 2.4 percentage points respectively over the past year to 4.6% and 4.9%.
     Unemployment increased over the month in most of the Central Valley. Compared to last year, however, the Central Valley's unemployment picture was mixed, an encouraging performance in these difficult times.  The jobless rate in Sacramento County was 4.3% last month, up from 3.9% in November 2000.  Nearby, San Joaquin County's unemployment rate also increased by 0.4 percentage points, to 9.6%.  Joblessness rose over the year in the Sacramento River valley but fell in several major counties of the San Joaquin Valley, including Kern County, down by 0.9 points to 10.7%, and Fresno County, down by 1.3 percentage points to 13.6%.  As usual, Imperial County had the state's highest jobless rate, 21.9%, but also registered the biggest year-to-year improvement, down by 3.7 percentage points from November 2000.  (Nancy D. Sidhu)
PR: http://www.edd.ca.gov/nwsrel12.htmhttp://www.edd.ca.gov/nwsrel12.htm
 

NOVEMBER JOBS DATA DISQUIETING

     The California Employment Development Department (EDD) released the November jobs data, and there were some unpleasant numbers.  Total nonfarm employment in California (NSA) increased by 11,000 jobs from October to November, but the year-over-year gain was a measly 12,900, or 0.1%.  Manufacturing job losses continued to accelerate, with a November loss of 88,400.  In the meantime, transportation-communications-public utilities (TCPU) posted an October-November job loss of 10,200, and also was down over the year by 9,400.  For this economic cycle, it now looks like June was the nonfarm employment high at 14,884,500; compared with November's total of 14,329,600.
     In Los Angeles County, the news was even worse.  While there was an increase of 11,000 jobs from October to November, the County lost 11,500 jobs over the year, the first time this has happened since early 1994.  Manufacturing job losses continued to accelerate, down by 21,500 in November.  Also in the year-to-year job loss column were wholesale trade (-700), retail trade (-3,500), and services (-300).  Culprits in the latter included: business services (-5,600); hotels (-1,200); and motion picture production (-10,600).  The latter at a November job count of 126,500 is at the lowest level since April, 1997.  It's the "de facto" strike impact.
     In Orange County, the November news was somewhat more pleasant.  Nonfarm employment growth slowed but was still up 1.7% or 24,300 jobs over the year.  However, the County's manufacturing sector continued in the job loss mode, with a loss of 2,100.  The Riverside-San Bernardino area also saw November nonfarm growth ease, to 1.8% or 18,300 jobs.  The area's once vibrant manufacturing sector is moving sideways, while TCPU posted a 300 job loss over the year.  In San Diego County, nonfarm employment growth eased to 1.8% or 21,700 jobs in November.  However, the manufacturing sector has begun to lose jobs over the year (-2,500), along with TCPU (-800) and wholesale trade (-200).
     Ventura County is on the edge, with November nonfarm job growth at an anemic 0.2% or just 600 jobs over the year.  Manufacturing continued to shed jobs (-700), while there was little or no growth in TCPU, or wholesale and retail trade.
     In the Bay Area, the November jobs report was just plain worrisome.  In the San Francisco metro area, nonfarm employment was down over the year by 0.8% or 9,100 jobs, while San Jose was down by 4.0% or 41,500 jobs.  The Oakland area managed a 0.8% or 8,200 job gain, however.  (Jack Kyser)
Cal Data: http://www.calmis.cahwnet.gov/file/lfmonth/cal$pr.txt
LA Data: http://www.calmis.cahwnet.gov/file/lfmonth/la$pr.txt
 

NO INFLATION IN SIGHT

     The US Producer Price Index (PPI) for finished goods declined by 0.6% in November, following a 1.6% decrease in October.  Energy prices, which dropped by 7.7% in October in the aftermath of the 9/11 attack, fell by another 3.8% last month.  The core PPI, which excludes food and energy prices, rebounded with a 0.2% increase after dropping 0.5% in October.  The PPI for finished goods was 1.1% below the year-ago level.  The PPI for intermediate goods fell by 0.5% in November, after a 1.5% drop in October.  The core PPI has declined for six consecutive months.  The PPI for crude goods (i.e. raw materials) jumped by 7.3% due to a 28.3% increase in energy prices.  It ended its six-month consecutive declines with a bang.  The core PPI declined by 0.8%, following a 1.7% drop in October.  Crude goods prices are highly volatile and tend to "over-react" to unexpected developments.  Natural gas prices jumped by 80% last month, but they were still 33% below the year-ago level.  Petroleum prices were 44% below the year-ago level.
     The US Consumer Price Index (CPI) was unchanged in November, after a 0.3% decline in October.  A 4.4% decline in energy prices offset the 0.4% increase in the core CPI.  Gasoline costs fell by 10.1% last month, following a 10.7% decline in October.  Gas prices were 21.5% below the year-ago level.  The core CPI rose by 0.4% last month, following 0.2% increases for four consecutive months.  New car prices rose by 0.6%, the largest increase in 10 years, but the final cost to consumers may be lower due to attractive financing deals.  Basically there's no inflationary pressure in the US at present.  The November CPI was 2.8% above the year-ago level.
     The LA Area CPI declined by 0.1% last month, following a 0.3% decrease in October.  The CPI was 2.7% above the year-ago level.  Energy prices fell by 4.7% last month, following a 5.5% drop in October.  Gasoline prices fell by 11.5% last month, following an 8.6% drop in October.  Gas prices were 23.0% below the year-ago level.  Electricity costs were 46.7% higher than a year ago, but natural gas service costs were 30.3% lower.  The core CPI was 0.3% higher over the month and 3.0% above the year-ago level.  In reality, consumers are probably experiencing less than 3% inflation by going to more discount stores than before or buying cheaper brands.  "Substitution effects" such as these are not included in the CPI.  (George Huang)
PPI PR: http://www.bls.gov/news.release/ppi.nr0.htm
US CPI PR: http://www.bls.gov/news.release/cpi.nr0.htm
LA Area CPI PR: http://www.bls.gov/ro9/ro9cpila.htm
 

OCTOBER HOTEL OCCUPANCY RATES

     According to PKF Consulting, local hotel occupancy rates recovered somewhat during October.  In Los Angeles County, the rate was 60.3%, up from 58.3% in September, but still well below last year's 79.9% occupancy.  The average daily room rate (ADR) continued to fall, by 8.0% to $111.96.  Within the County, Valencia did the best in October with an 81.5% occupancy, followed by Pasadena at 72.5%.  Downtown Los Angeles was at 44.6%, well below last year's 77.6% rate.  However, the ADR increased by 7.2%.   Hotels on the Westside were a mixed situation.  Santa Monica came in at 64.6%, West Hollywood had a 58.3% rate, but Beverly Hills struggled with a 48.1% occupancy.
     Orange County's October hotel occupancy was 57.1%, up from 50.6% in September, but again below October 2000's 74.4%.  And the ADR declined during the month by 6.8% to $105.15.  The Orange County Airport area had the highest rate during the month, 61.0%, while Anaheim posted a 55.0% reading.  (Jack Kyser)
 

MUSINGS FROM THE 3RD QUARTER REAL ESTATE RESEARCH COUNCIL REPORT

     Being number wonks, we love the quarterly reports from the Real Estate Research Council of Southern California.  We checked out the trend in foreclosures, which generally continued down to low levels.  The important stuff this time was the vacancy rate data.  Office vacancy rates around the region crept up during the 3rd quarter of 2001.  Orange County saw a big bounce from 8.8% in the 2nd quarter to 13.0% in the 3rd.  In the Inland Empire, the rate went from 12.7% to 14.0%.  In Ventura County, the office vacancy rate moved from 10.8% to 11.2%, while in San Diego County the rate went from 5.3% to 7.4%.  Los Angeles County's office vacancy rate went from 13.7% to 14.0%, not bad in this context.  There were interesting trends by area in the County.  In the South Bay, the rate went from 14.6% in the 2nd quarter to 16.2% in the 3rd.  In West Los Angeles, the rate went from 11.2% to 11.6%.  However, "central" LA posted a decline from 18.5% to 17.5%.
     On the industrial side, the Inland Empire enjoyed a decline from 7.3% in the 2nd quarter to 6.8% in the 3rd.  Everybody else saw increases.   Orange County jumped from 4.8% to 6.6%, Ventura County went from 7.9% to 8.1%, while San Diego County spurted from 6.7% to 8.2%.  In Los Angeles County, the industrial vacancy rate moved from 3.9% in the 2nd quarter to 4.7% in the 3rd.  The San Gabriel Valley dipped to 3.6% from 3.8%, while "mid-cities" held steady at 7.6%.  Elsewhere, the movement was up with "central" LA going from 1.4% to 2.0%, the San Fernando Valley went from 5.2% to 5.7%, while the South Bay posted readings of 4.5% and 4.6%.  (Jack Kyser)
 

OTHER LOCAL ECONOMIC NOTES

     Hooray!  The Director's Guild of America has renegotiated their contract with the Alliance of Motion Picture and Television Producers well in advance of its July 1, 2002 expiration date.  This removes some uncertainty from the production outlook, and industry experts expect an upswing in production early next year, which should put industry employment back in the plus column.
     Also, Boeing has decided to keep producing the 717 commercial jet, though at a reduced rate.  While this decision will mean some additional layoffs, at least the program is alive.  (Jack Kyser)
 

CHINA FINALLY BECOMES A MEMBER OF THE WTO

     After a 15-year wait, China officially became a member of the World Trade Organization (WTO) last Tuesday, 12/11/01.  On the same day, the World Bank released a report on China stating that the country is facing a monumental economic challenge in 2002 as it makes its entrance into the international trading arena.  According to the World Bank,
     -- China needs to create 8 to 9 million jobs annually over the next decade.  This compares with additions of 6 million per year in the last three years.
     -- China's GDP growth has slowed from 8% annually in recent years to 6.5%-7.0% this year.
     -- For the first 11 months of this year, China's trade surplus of $20.4 billion is below last year's by $3.1 billion for the comparable period.
     -- China must raise its productivity and lower barriers to entry into its services industries.
     Some complicating issues:  China has acknowledged that its economy (GDP) needs to grow by at least 8%. China also claims that its unemployment rate is a fairly low 3.5% this year and it would not like to see this rise beyond 4.5% next year.  It also confirms that its employment data does not include "tens of millions" of workers in state-owned enterprises (known as "xiagang" workers most of whom do not actually work but are kept on payrolls).  Even more worrisome is the large "army" of jobless peasants (150 million) who drift from city to city looking for manual jobs at wage levels that are pitiful.  They are not counted in employment surveys because they are not registered with local authorities.
     WTO membership requires the lowering of tariffs on food imports which will bring more foreign competition for China's farmers.  China may implement these measures more slowly than expected until the global economy picks up. On the positive side, however, WTO rules will make China more attractive to foreign investors.  Consequently, foreign direct investment is predicted to increase from $45 billion this year to $50 billion in 2002.  Much of this capital is going into telecommunications and electronics equipment manufacturing in coastal cities.
     The "tea leaves" are cloudy, perhaps sending warnings of troubled times ahead for China.  (Ken Ackbarali)
 

QUICK STATS:

* BEA: US current account for 3Q01: -US$94.98 billion (2Q01: -$107.58bil.)
* BLS: US export prices for 11/01: -0.4% (10/01: -0.7%)
* BLS: US import prices for 11/01: -1.6% (10/01: -2.4%)
* BLS: US Producer Price Index for finished goods for 11/01: -0.6% (10/01: -1.6%)
* BLS: US Producer Price Index for intermediate goods for 11/01: -0.5% (10/01: -1.5%)
* BLS: US Producer Price Index for crude goods for 11/01: +7.3% (10/01: -9.1%)
* BLS: US Consumer Price Index for 11/01: +0.0% (10/01: -0.3%)
* BLS: LA Area Consumer Price Index for 11/01: -0.1% (10/01: -0.3%)
* Cal EDD: California unemployment rate for 11/01: 6.0% (10/01: 5.8%)
* Cal EDD: California nonfarm employment for 11/01: +11,000 (10/01: +7,500)
* Cal EDD: LA County unemployment rate for 11/01: 6.0% (10/01: 6.1%)
* Cal EDD: LA County nonfarm employment for 11/01: +11,000 (10/01: +10,900)
* Census: US wholesale trade for 10/01: -1.4% (9/01: -1.2%)
* Census: US wholesale inventories for 10/01: -1.0% (9/01: -0.4%)
* Census: US retail trade for 11/01: -3.7% (10/01: +6.4%)
* Census: US business sales for 10/01: +2.7% (9/01: -2.9%)
* Census: US business inventories for 10/01: -1.4% (9/01: -0.6%)
* Federal Reserve: US industrial production for 11/01: -0.3% (10/01: -0.9%)
* Federal Reserve: US industrial capacity utilization rate for 11/01: 74.7% (10/01: 75.0%)


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