The Economic Data Global Express (e-EDGE)

v.6 n.14       Released April 8, 2002
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

U.S. LABOR MARKETS MIXED IN MARCH

     The Bureau of Labor Statistics released its monthly labor market report last Friday showing that labor market conditions changed little in March.  The Bureau's household survey revealed that the nation's unemployment rate rose to 5.7% in March from 5.5% in February and 5.6% in January.  The peak rate (so far, at least) was December's 5.8%.  All of last month's increase was due to rising unemployment among adult men.
     Since March 2001, the nation's overall jobless rate has risen by 1.4 percentage points.  Adult unemployment rates rose by the same amount, while joblessness among teenagers increased by 2.6 percentage points.  Looking at other categories, unemployment among whites rose by 1.3 percentage points, blacks by 2.3 percentage points, and Hispanics by 1.1 percentage points.  Jobless rates for those with at least a four-year college degree increased by 0.8 percentage points, while rates for those with less than a high school diploma rose by 1.2 percentage points.  However, joblessness among those with a high school diploma or diploma-plus-some-college increased the most, by 1.6 percentage points, reflecting the severe employment losses taken in the manufacturing sector.
     The Bureau's survey of employers showed that nonfarm employment increased by 58,000 jobs in March following revised declines of 2,000 and 109,000 jobs in February and January respectively.  Last month's rise in employment was the first "plus" figure since July 2001.  The last two months represent a distinct improvement over the prior six months, when an average of 209,000 jobs were lost each month.  The broad picture for March shows job losses in construction and manufacturing, the latter for the 20th consecutive month of decline.  However, these losses were more than offset by an increase of 135,000 jobs in service producing industries.  Industries registering notable increases were help supply services, up by 69,000 positions, health services, rising by 32,000, and engineering and management services, which rose by 12,000 jobs.  Help supply job counts have risen for two months now, an encouraging sign.  Firms are turning to temps to catch up with increased orders.  Then, if the uptrend looks like it will continue, they will hire permanent workers again.  As the economic recovery gains strength, we also will see progressively smaller losses in manufacturing and more widespread gains in services.  (Nancy D. Sidhu)
PR: http://www.bls.gov/news.release/empsit.nr0.htm
 

SOME NOTES ON DATA REVISIONS

     Revisions to previously issued data can be exasperating.  Suddenly, you no longer know as fact something that was "true" the day before.  The latest case in point is February's change in nonfarm payrolls.  Initially, the Bureau of Labor Statistics reported a gain of 66,000 jobs for that month, leading many to speculate the recession in the labor markets had ended.  But on Friday, February's gain became a loss of 2,000 positions.  Who knows what will happen to March's gain of 58,000 jobs this time next month?
     Revisions of this sort usually occur because the statistical agency receives new information from some of its reporting companies or gets the data too late to include in the agency's initial release.  Thus, revisions are a normal part of data collection and reporting by local, state, and national agencies.  Each agency has its own rules for handling missing data.  The rules are designed to ensure a sort of "neutrality," i.e., they try not to add anything new to whatever trends are already present in the survey returns that arrived on time.  However, that very neutrality in the initial release means the revisions themselves can have useful information.  In particular, downward revisions often are made during recessions, which is why the February employment revision was so disappointing.  Conversely, a number of upward revisions in several reports might signal that the economic recovery is gaining strength. Flip-flops, from plus to minus or vice versa, often occur at turning points, in this case the bottom of the economic cycle.   (Nancy D. Sidhu)
 

ASIAN ECONOMIES TO BENEFIT FROM STRONGER U.S. RECOVERY

     According to Bloomberg Financial Markets, growth forecasts for most Asian economies have been upgraded in recent weeks, now that the U.S. economy's recovery appears to  be stronger than most forecasts published in December 2001-January 2002.  Topping the list, measured by forecasted GDP growth for 2002, are China (8%), South Korea (6%), Malaysia (4%), and Taiwan (4%). Singapore (3.5%) and the Philippines (3.5%) are expected to register somewhat modest turnarounds from recessions in 2001.
     Who are the laggards?  The most worrisome is Japan, whose sheer size exerts huge impacts on economies in the region as well as the global economy.  Japan's GDP declined in 2001 by 0.4% and  is likely to decline again this year by 1.0%.  Indonesia (+3%) will see a somewhat slower pace of expansion in 2002. Hard hit by a falloff in tourism, high-tech, and international trade, Hong Kong is predicted to be in virtual stagnation (GDP up by an anemic 1%) in 2002.  Thailand will be able to show only modest growth, a 2% rise in its GDP in 2002, reflecting problems in its banking, real estate, and petrochemicals sectors.
     Export growth is a key factor in understanding the divergence in economic performance among the Asian economies this year. And this is closely tied to the appetite of American markets for both high-tech and low-tech manufactured goods. Consequently, the stronger the U.S. economic recovery, the bigger the boost will be for Asian exports.  For exporters to and investors in Asia, the dark clouds may be lifting.  (Ken Ackbarali)
 

LOCATION PRODUCTION ACTIVITY REBOUNDING

     Off-lot film production is starting to recover, according to March data from the Entertainment Industry Development Corporation.  Total production days were down over the year by 13.6%, the smallest decline since September, 2001.  The March change was also a big improvement over February's 29.4% drop and January's 33.2% slippage.  The March total of 2,634 production days was also the largest since April, 2001 (which was production frenzy time).
     Feature films remain the weak link, with a 32.2% decline in March filming days, while commercial activity was off by 24.5%.  Offsetting these were a 6.2% increase in TV show production and a 9.2% gain in music.  The April numbers should be even better, as we're seeing more crews are seen on the streets of downtown Los Angeles, the World's largest backlot.  (Jack Kyser)
 

THE 2002 FORTUNE 500

     According to the 2002 edition of the Fortune 500 roster, there were 21 qualifying corporations in the Los Angeles five-county area.   Los Angeles County checked in with 13, Orange County had 5, and Ventura County counted 3.  However, the Riverside-San Bernardino area got blanked in this year's 500.
     Four local firms "departed" (their terminology) from the 500, with Litton Industries (LA) and Bergen Brunswig (Orange) getting gobbled up in mergers.  Sales at Merisel (LA) and Fleetwood Enterprises (R-SB) didn't grow fast enough to stay on the roster.  For those that care, four Fortune 500 firms were headquartered in the city of Los Angeles, 3 were in El Segundo, while Pasadena had 2.  In Orange County, Santa Ana was the hot spot for 500 firms with 3.  (Jack Kyser)
 

FEBRUARY HOMEBUILDING MIXED

     Housing permitting trends were mixed in February according to the Construction Industry Research Board.  For the state, the number of permits issued was up over the year, but the total for the first 2 months of the year was down by 6.1% from the comparable 2001 period.
     In Los Angeles County, the number of permits issued was also up over the year, but the 2 month total lagged by 55.2%.  However, at the start of 2001, a permit fee increase caused a surge of activity.  In Orange County, homebuilding is off to a good start, with February's permit total up over the year, and the 2 month total ahead by a stunning 122.1%.  This is a dramatic upturn, after a dismal performance in 2001.  The Riverside-San Bernardino area kept rolling in February, with the permit total up over the year, while the 2 month total was up by 26.2% over a strong 2001.  San Diego County's February housing permit total was down over the year, and the 2 month total was behind last year by 12.7%.  In Ventura County, the February total was up over the year, but the 2 month total was down by 16.4%.
     In the Bay Area, the February housing permit tale continued to be glum.  The Oakland area's 2 month unit total was 40.1% behind last year, the San Francisco area was down by 55.7%, while San Jose slipped by 12.1%.  (Jack Kyser)
 

HOUSING AFFORDABILITY DROPS IN SO. CAL.

     The Housing Affordability Index (HAI), calculated by the California Association of Realtors, showed what many of us have noticed long ago--housing is getting less affordable.   HAI is the percentage of households that can afford a median-priced home (or condo).  The HAI for California was 31% in February, the same as in January but lower than the 36% in February of 2001.  LA County's HAI declined to 33% in February from 34% in January and 38% a year ago.  Orange County's HAI was the lowest in Southern California at 30%, down from 31% in January and 31% a year ago.  Ventura County's HAI was 36% in February, unchanged from January and slightly lower than the 38% scored a year ago.  The Inland Empire, which is the western part of Riverside and San Bernardino counties closest to LA and Orange counties, was the most affordable area in the Southland with an HAI of 48% in February, down from 51% in January and a year ago.  San Diego's HAI was not reported, but it was 27% in January and 25% in February, 2001.
     Up north, affordability improved a bit in Santa Clara County (San Jose MSA) and the San Francisco Bay Area, thanks to the decline in home prices that resulted from the tech crash.  Yet at 27% and 23% respectively, those two areas remain very unaffordable to potential and recent (<3 years) buyers.  The State's least affordable county in February was Santa Barbara (HAI: 14%).  A year ago, the honor belonged to San Francisco County (11%).  The most affordable area in February was the High Desert area of northeastern San Bernardino County at 68%.
     California's housing affordability is significantly lower than the national average of 57%.  Consider this the premium of living in the Golden State.  Is low affordability a problem?  Yes, but mostly for new buyers and renters.  Existing owners actually enjoy the additional value in their properties.  With population pressure increasing and construction lagging far behind, fundamentals are pushing prices ever upward.  (George Huang)
PR: not posted at the time of this writing, but should be available at http://www.car.org/index.php?id=OTE0 in a day or two
 

NONRESIDENTIAL CONSTRUCTION GENERALLY WEAK IN FEBRUARY

     According to the Construction Industry Research Board, nonresidential construction was generally behind the level of activity in 2001.  For the state, the 2 month total for industrial permit values was down by 44.1%, while office permits were behind by 76.9%.  However, retail permits were ahead by 11.0%.
     In Los Angeles County, the 2 month total for 2002 for all 3 sectors lagged last year, with industrial off by 47.6%, office down by 92.3% and retail behind by 7.3%.  The pattern was similar in Orange County, with industrial valuations down by 62.1%, office off by 47.1% and retail behind by 9.7%.
     In the Riverside-San Bernardino area, the 2 month total for industrial permit values were down by 12.2%, while retail was off by 42.9%.  However, office permits were ahead by 84.6% (on a small base).  In San Diego County, industrial activity was down by 63.8% and office was off by 71.5%.  However, the 2 month total for retail was ahead by 57.1%.  In Ventura County, 2 month industrial permit values were behind by 17.4%, while office was down by 95.9%.  There was such a surge in retail permits that a calculation of percentage change was not meaningful.
     In the Bay Area, nonresidential construction activity through February continued to be muted.  Industrial permit values were down by 69.4%, office was off by 79.0%, while retail trailed by 16.8%.  (Jack Kyser)
 

RETAIL SALES NEWS

     The State Board of Equalization recently released 2nd quarter 2001 taxable retail sales data by area (better late than never), as well as an estimate of 4th quarter total taxable sales (business and retail) in the state.  Let's get the bad news out of the way, and look at the latter first.  The preliminary estimate was a decline of 5.1% over the 4th quarter of 2000, which followed on the heels of a 4.4% estimated decline in 2001's 3rd quarter.  This means that total taxable sales in the state slipped by 1.2% in 2001.  Ouch!
     Looking at the 2nd quarter taxable retail sales data, the state posted a 3.7% increase over the year, Los Angeles County was up by 3.1% and Orange County recorded a 5.8% gain.  Riverside County managed a region-leading 7.2% increase, San Bernardino County moved ahead by 5.9%, San Diego County came in with a 6.4% gain, and Ventura County posted a 6.7% increase.  (Jack Kyser)
PR: http://www.boe.ca.gov/news/tsalescont01.htm
 

QUICK STATS:

* BLS: US unemployment rate for 3/02: 5.7% (2/02: 5.5%)
* BLS: US employment for 3/02: +58,000 (2/02: -2,000)
* Cal. Assn. of Realtors: California housing affordability index for single-family homes for 2/02: 31% (1/02: 31%)
* Cal. Assn. of Realtors: California housing affordability index for condos for 2/02:  43% (1/02: 44%)
* Cal. Assn. of Realtors: LA County housing affordability index for 2/02: 33% (1/02: 34%)
* Census: US new factory orders for 2/02: -0.1% (1/02: +1.1%)
* Census: US factory shipments for 2/02: -2.8% (1/02: +1.4%)
* Census: US unfilled factory orders for 2/02: +0.3% (1/02: -1.3%)
* Census: US factory inventories for 2/02: -0.4% (1/02: -0.8%)
* BEA: US vehicle sales for 3/02: -1.8% (2/02: +5.7%)
* Census: US wholesale trade for 2/02: +0.8% (1/02: +1.2%)
* Census: US wholesale inventories for 2/02: -0.7% (1/02: -0.5%)
* Federal Reserve: US consumer credit for 2/02: +5.1% annual rate (1/02: +5.1% a.r.)

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