The Economic Data Global Express (e-EDGE)

v.6 n.1       Released Jan. 7, 2002
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

U.S. LABOR MARKETS WORSE IN DECEMBER

     The Bureau of Labor Statistics released its monthly labor market report last Friday showing that labor market conditions continued to deteriorate in December.  Nonfarm employment fell by 124,000 jobs in total after dropping by a revised 371,000 jobs in November and plunging by 465,000 jobs in October.  The nation has lost almost 1.4 million jobs since the current recession began in March.  Excluding government employees, firms in the private sector shed 187,000 workers in December and a whopping 1.7 million since March.  Many industries cut jobs last month.  As usual, the biggest losses came in manufacturing and help supply services (or temporary help) firms.  Other industries losing jobs included air transportation and wholesale and retail trade (because they added fewer seasonal workers than normal).  Industries adding jobs in December included health services and social services.
     The Bureau's survey of households wasn't pretty either.  The nation's unemployment rate rose to 5.8% in December from a revised 5.6% in November and 5.4% in October.  November's rate was the highest since April 1995.  Even worse, the twelve-month jump of 1.8 percentage points was the biggest since the 1982 recession.  Jobless rates increased for most age, race, ethnic, and educational categories.  The exceptions were adult men, whose unemployment rate was the same as in November (5.2%) and high school graduates, whose rate edged down from 5.0% to 4.9%.  The official count of unemployed has risen by about 2.6 million over the past 12 months to 8.2 million persons.  However, these figures understate the true state of affairs.  Over the past year, the number of involuntary part-time workers increased by 1.1 million (to 4.3 million).  Thus, some 12.5 million individuals who want to work full-time were unable to do so in December.
     This report did contain a few pieces of less dreary news.  The average workweek rose in December, to 40.7 hours from 40.3 hours in November.  Also, the Bureau's Index of Aggregate Weekly Hours (which combines the impact of the number of workers and the average workweek) stabilized last month, though at a low level.  These are both encouraging signs the recession is abating; i.e., the economy is still falling but at a slower pace.  However, both statistics may have been affected by special factors in December that could disappear in January or February.  We'll need several months of improvement before we can declare the recession is over.  (Nancy D. Sidhu)
PR: http://www.bls.gov/news.release/empsit.nr0.htm
 

ARGENTINE PESO DEVALUED BY 29% AND WILL FLOAT IN SIX MONTHS

     The interim government of Argentina, headed by President Eduardo Duhalde, officially devalued the peso by 29% over the weekend.  It will now take 1.40 Argentine pesos to buy US$1.00, instead of the decade-long peg of one peso being equal to one U.S. dollar.  This action follows two weeks of riots and looting in major Argentine cities, the resignation of four presidents, and the country's default on its $132 billion external debt.
     The devaluation is expected to raise prices of a wide range of commodities, push thousands of firms into bankruptcies, and impose hardships on individuals.  Banks, utilities, and oil companies will be especially hard hit.  The economy is already in its fourth year of recession and unemployment is approaching 20%.  With the default action, Argentina's credit rating has been downgraded.  Foreign investors will shy away from the country until the government's new economic policies can be assessed.
     Argentina's peso became increasingly overvalued during the late 1990s as the U.S. dollar soared to new highs against most currencies.  The decision to devalue now and float the currency in six months will allow adjustments to reflect market conditions.  Some analysts see an eventual 40% devaluation.
     One challenge going forward is for Argentina to ramp up exports from its traditional low base--exports are only 10% of its gross national product.  Another challenge is to raise its domestic savings rate in order to reduce its dependency on foreign capital--Argentina seriously over-borrowed in the 1990s.  2002 is going to be a very difficult year for Argentina, and there is no easy way to escape the adjustment pains that are in store.  However, with some help from the international financial community and prudent economic measures, the situation can be turned around.  (Ken Ackbarali)
 

MANUFACTURING CLIMBING OUT OF A RECESSION?

     The manufacturing Purchasing Managers' Index (PMI) compiled by the Institute of Supply Management (formerly the National Association of Purchasing Management) posted a higher-than-expected rate of 48.2%, the highest score since November 2000.  The index was 44.5% in November and 39.8% in October.  December was the 17th consecutive month of contraction in manufacturing (as indicated by an index < 50%).  Many signs in this report pointed to a forthcoming recovery for the manufacturing sector.  First, the new orders index rose to 54.9%, the highest level since April 2000.  Sectors reporting increases in new orders include electronic components and computers.  The new orders index had been above 50% in August and September but took a big hit from the 9-11 attack.  The orders backlog index rose slightly to 39.5% and inventories continued to decline with the index at 37.7%.  This combination of more orders, fewer inventories, and more backlogs set the stage for an increase in production, which rose to 50.6% (above the breakeven point of 50%).  The employment index at 40.5% was still in the contraction level, but seems to have bottomed out.  The PMI seemed to be on the path of recovery prior to the 9-11 attacks.  Indexes for new orders, production, orders backlog, employment, and imports all took a hit from the 9-11 attacks but have mostly recovered by December.  (George Huang)
PR: http://www.ism.ws/ISMReport/ROB012002.cfm
 

OCTOBER TRADE VALUES GENERALLY DOWN

     According to the U.S. Department of Commerce, international trade values were down in October at California's two largest customs districts.  At Los Angeles, the value of exports dropped by 21.1% over the year, while imports slipped by 9.7%.  Total two-way trade value for October was $19.5 billion, off by 13.3%.  The 10-month total for Los Angeles was about $179.0 billion, a decline of 5.8% over the like period of 2000.
     The numbers for the San Francisco district continued to be grim.  Export values in October were down by 40.9% over the year, while imports dropped by 42.6%.  Total trade value for the month was $6.9 billion, which was down by 41.8%.  At 10-months, the San Francisco district's total international trade value was $82.3 billion, down by 21.6% over 2000.
     A little good news was found at the San Diego district.  Its export values were down by 4.3% in October, but imports were up by 3.4% (we almost got giddy over this number).  The October total trade value was $3.2 billion, up by 0.5% over the year.  The district's 10-month total was $28.2 billion, off by 3.5% over 2000.  (Jack Kyser)
 

NEW HOME CONSTRUCTION CONTINUED MIXED IN NOVEMBER

     According to the Construction Industry Research Board, new homebuilding activity in California continued to be a mixed bag in November.  For the state, total permits issued during the month were down from the year-ago count, and at the 11-month mark the permit total was down by 0.9%.  Much of the weakness was in the apartment sector which was off by 6.7%.
     In Southern California, activity was also down in November over the year with one exception.  That was the Riverside-San Bernardino area, which posted an increase in housing permits over the year.  At the 11-month mark, the area continued to set the homebuilding pace in the state with an increase of 25.0%.  Los Angeles County saw a decline over the year in November, but its 11-month permit total was up by 8.2%.  San Diego County's November permit count was also down over the year, and its 11-month permit total was slightly above water with a 1.2% gain.  In Orange County, the November permit total was down over the year, and the 11-month total was off by 32.7%.  Ventura County's housing permit total was also down in November, and for 11 months lagged last year by 16.2%.
     Caution continued to reign in the Bay Area during November.  For 11 months new housing permits in the Oakland area were down by 15.7%, San Francisco was off by 47.3%, and the San Jose area was behind by 19.2%.  (Jack Kyser)
 

NONRESIDENTIAL CONSTRUCTION GENERALLY DOWN IN NOVEMBER

     The November nonresidential data from the Construction Industry Research Board also pointed to continued caution, but with exceptions.  In Los Angeles County, industrial permit values at 11 months were 47.8% behind last year, while retail was off by 5.0% (still, the 11-month total was a hefty $393 million in a soft retail market).  New office values were up by 107.3%, and while the pace of new development has moderated in recent months, this still has to be of some concern.  In Orange County, office permit values were down by 46.5% for 11 months while retail lagged by 12.9%.  However, new industrial permit values were ahead by 11.4%, though the pace of development has moderated.
     In the Riverside-San Bernardino area, industrial permit values were down by 22.6% at 11 months.  However, office values were up by a disquieting 41.5% while retail advanced by 4.7%.  San Diego County at the 11-month mark registered a 6.9% increase in office permit values, while industrial lagged by 43.2% and retail was down by 17.1%.  In Ventura County, the 11-month permit value for office buildings was down by 5.5%, but retail was ahead by 129.0% (on a small base) while industrial values were up by 31.1%.
     In the Bay Area, industrial permit values were down by 31.1% at 11 months, while the office sector was off by 36.7%.  However, retail permit values were up by 23.8%, with a 53.4% increase in beleaguered Santa Clara County.  (Jack Kyser)
 

QUICK STATS:

* BLS: US unemployment rate for 12/01: 5.8% (11/01: 5.6%)
* BLS: US nonfarm employment for 12/01: -124,000 (11/01: -371,000)
* Census: US construction spending for 11/01: +0.8% (10/01: +0.8%)
* BEA: US vehicle sales for 12/01: -8.3% to 16.5mil. annual units (11/01: -15.5% to 18.0mil.a.u.)--the ending of 0% financing played a role
* Institute for Supply Mgmt.: US manufacturing Purchasing Managers' Index for 12/01: 48.2% (11/01: 44.5%)
* USDA: US agricultural prices for 12/01: +0.0% (11/01: -1.1%)

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