The Economic Data Global Express (e-EDGE)

v.6 n.40       Released Oct. 7, 2002
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

ECONOMIC LOSSES MOUNT AS PORTS REMAIN SHUT

     As West Coast ports remain closed for the second week, economic losses are mounting.  A short shutdown would have impacted the transportation and logistics sectors the most by causing temporary disruptions, but now the impacts are being felt across the whole country and in many industries.  In fact, because the seaports are one of the key bottlenecks of our economy (thanks to the importance of international trade in this modern era), the negative impacts could further weaken the economic recovery currently underway.
     In this era of distributed manufacturing and global trade, it's hard to find a manufacturer not impacted by the ports' shutdown.  Some manufacturers that depend on foreign-made components had to shut down their production lines due to a lack of parts.  "Just-in-time" manufacturers now realize they should also have some "just-in-case" inventories of parts and raw materials to last through supply disruption totally out of their control.  When Japanese manufacturers perfected the "just-in-time" system, they were relying on nearby satellite suppliers to deliver parts for final assembly at a central facility.  Thanks to information technology and reliable, inexpensive transportation service, today's manufacturing is globally distributed to utilize the comparative advantages of different areas, such as cheap labor in China, precision manufacturing in Japan, and tariff advantages of Mexico.  (The computer on your desk right now probably has a case from China, motherboard from Taiwan, harddisk from Malaysia, and was assembled in China or Mexico.  Lacking any of these components, this computer would not make it out of the factory door.)
     Manufacturers that did not prepare for the ports' labor problems are now facing many difficult choices.  Some lack the capability to substitute imported components or finished products in a timely fashion.  We are also very concerned about the plight of independent truck drivers who are not protected by corporate rainy-day funds and State unemployment insurance.  Also many trade-dependent small businesses may not have enough cash to cushion the loss of businesses.
     Consumers may see the impact of the shutdown at local stores.  Some produce prices have dropped as farmers redirect shipments originally intended for exports to the domestic market.  Conversely, some commodity prices could rise as a result of the lack of imports.
     Talks between the PMA and ILWU broke down over the weekend and the Bush Administration has initiated the steps needed for an eventual Taft-Hartley action, which will order the ports to open and workers back to work for 80 days.  But Taft-Hartley is no substitute for a final agreement.  Workers can be forced back to work, but no one can force them to perform at normal efficiency.  Deliberate slowdowns (labeled "strike-with-pay") was the reason cited by the PMA for its decision to lock out the workers.
     In short, the port shutdown is beginning to take a toll on the U.S. economy, and the impacts extend way beyond the logistics sector on the West Coast.  The impacts will worsen the longer the shutdown.  There will be around 200 ships along the West Coast awaiting unloading by the end of today.  More are on their way.  (George Huang)
Trade statistics of interest: http://www.e-edge.org/special/ports.htm
 

SEPTEMBER LABOR MARKET REPORT LITTLE CHANGED

     The Bureau of Labor Statistics just reported on U.S. labor markets in September.  Nonfarm employment payrolls unexpectedly fell by 43,000 jobs last month following revised gains averaging 54,000 during the previous four months.  Since April, the nation's nonfarm payrolls have grown by 217,000 jobs, an increase of just 0.13%.  Job losses were concentrated among goods producers, transportation companies, and trade.  Manufacturing led the list of industries that lost employees last month, with a decline of 35,000 jobs, the 26th consecutive month of loss.  Other losers included air transportation, trucking & warehousing, retail and wholesale trade, and communications services.  On the plus side, health service industries gained 21,000 more employees followed by engineering & management services (+18,000) and finance, insurance & real estate (+16,000).  Finally, the government sector added only 4,000 positions.
     The U.S. unemployment rate edged down to 5.6% in September from 5.7% in August and 5.9% in June and July.  The actual--un-rounded--decline over the month was quite small (from 5.709% to 5.648%).  However, even this performance suggests that joblessness really did decline a bit over the summer months.  Another piece of supporting evidence is the median duration of unemployment, which dropped from 11.7 weeks in June to 9.5 weeks last month.  By way of comparison, a typical spell of unemployment lasted only 7.1 weeks a year ago.
     Overall, the September labor report showed little change last month and modest improvement at best over the past three months or so.  (Nancy D. Sidhu)
PR: http://www.bls.gov/news.release/empsit.nr0.htm
 

BRAZILIAN ECONOMY WILL HAVE NEW LEADERSHIP IN 3 WEEKS

     Luiz Inacio Lula da Silva, head of Brazil's left leaning Workers Party, won more votes in Sunday's presidential elections than other contenders but failed to win a majority.  On October 27,  in a run-off election, Mr. da Silva will face Mr. Jose Serra, the conservative choice of the ruling party led by President Henrique Cardoso.  Absent some extraordinary development in the next three weeks, it is a foregone conclusion that Mr. Da Silva will be Brazil's next president and the country's future will take a new course.
     Immediate reaction to the election results were negative, at least in financial markets.  The Bovespa index, Brazil's most widely-watched stock market measure, fell 3% and its currency, the "real", lost 1.4% to 3.66 versus the dollar.  Foreign investors are continuing to worry about Brazil's $236 billion foreign debt, $100 billion of which is owed by the government.  Despite securing a $30 billion IMF loan in September, there is concern that Mr. da Silva's new government may have difficulties meeting the commitment to achieve budget surpluses equal to 3.75% of GDP for the next 3 years.  This would require constraining government spending on education, health, and other human services. These are the very social programs that the new government is likely to see as high priorities for achieving its pledge to improve conditions for poor Brazilian families.
     Why should we care about these new developments in Brazil?  The country is the largest and most populous in Latin America, with 172 million people, and has the 11th biggest economy in the world, ranking behind Mexico and Spain.  Brazil's financial condition affects all of Latin America, but especially Argentina and Uruguay. If the perception of foreign investors sours as a result of harmful or risky policies (in the months following the da Silva's administration taking power), the region's economies would feel the effects. The systemic risk or contagion would be even greater in the event of a debt default by Brazil so soon after Argentina's default last year. Let's keep our fingers crossed and hope for a positive outcome.  (Ken Ackbarali)
 

AUGUST LOCAL TRADE VALUES

     The Department of Commerce report on two-way trade values for July was also in the mail, and the results were also encouraging (taking place before the on-going lock-out at Pacific Coast ports).  At the Los Angeles Customs District, export values for July were down over the year by 5.9%, while import values were up by 4.8%.  Total two-way trade during the month was up 1.6% to $18.4 billion, while the 7-month total of $120.6 billion was behind last year by just 2.4%.  The difference has been slowly shrinking.
     At the San Francisco district, July export values were down over the year by 11.5% (the smallest loss since May 2001), while imports eased by 2.0%.  Total two-way trade value during the month was $6.8 billion, down by 6.2%.  The 7-month total was $45.9 billion, off by 25.2% from the comparable 2001 period.  Again, the loss is slowly shrinking.   The July numbers for the San Diego Customs District were quite cheery.  Export values were ahead by 15.9%, and imports were up by 13.6%.  The month's total of $3.8 billion was up by 14.4%, and the 7-month total was ahead of last year by 6.7%.
     Now about the lock-out.  There have been several estimates of the economic impact (from $943 million a day up to $2 billion a day), and some have been criticized as too high.  The longer the shut-down goes on, the bigger the impacts, which would move the impact toward the high end.   This would include jobs, loss of cargo, business disruptions (plant closures), loss of business, and higher costs due to diversions of shipments.  For example, the independent truck drivers who move containers to and from the docks are losing between $2.7-3.1 million per day, a loss that they will not be able to make up.  (Jack Kyser)
 

LOCATION FILMING UP IN SEPTEMBER

     According to the Entertainment Industry Development Corporation, the number of off-lot film production days in the County was up by a stout 54.9% over the year.  Setting the pace was work on features, up by 117.3%.  At 930 days, it was the highest level of activity in this segment since May, 2001, when the "de facto" strike production frenzy was starting to wind down.  Commercial location activity was also up in September, by 32.9% over the year, and TV activity climbed by 44.1%.  The only down note in the September location filming report came from music, which was down by 16.2%.  (Jack Kyser)
 

LOCAL AUGUST HOTEL DATA (IT SEEMS SO SOON)

     The August hotel data from PKF Consulting has just been released (the July data was somewhat delayed), and the recovery process continued.  The hotel occupancy rate in Los Angeles County was 75.2%.  While down from last year's 79.3%, it was the highest level since August of last year.  However, the average daily room rate (ADR) was down by 5.6% to $112.28.  Around the County, Valencia reported a 93.0% occupancy (93.5% last year) and a 1.0% increase in the ADR.  Hollywood had an 89.1% occupancy rate (89.6% last year) during the month, but the ADR slipped by 1.2% to $89.32.  Santa Monica posted an August occupancy of 85.4% (85.4%), but the ADR declined by 5.7% to $201.89.   The South Bay had an occupancy of 83.9% (83.7% last year), but the ADR slipped by 9.9% to $89.79.
     The August hotel occupancy rate in Orange County was 76.5%, compared with 79.1% last year.  The rate also eased from the nearly 77% rate of July.  The ADR dropped by 4.2% to $110.26.  The highest occupancy rate was found in South County at 80.0% versus 77.5% last year.  However, the ADR declined by 5.0%.  North County had an occupancy rate of 79.4%, compared with 80.5% last year.  But the ADR slipped by 7.2%.  (Jack Kyser)
 

AUGUST HOMEBUILDING SO-SO

     The August data from the Construction Industry Research Board continued to paint a mixed picture on new homebuilding.  For the state, the number of units permitted were down over both the month and year.  At the 7-month mark, the total number of permits is up over last year by 3.2%, with all the strength in the single family sector.
     Los Angeles County's 7-month housing permit total still lagged last year by 9.7%, but the difference is narrowing.  Multi-family activity was somewhat weaker than singles.  Orange County's 7-month total was ahead of last year by 13.9%, thanks to on-going strength in the multi-family sector.  New homebuilding in the Riverside-San Bernardino area continued to rumble steadily forward, with the 7-month total up over last year by 19.2%.  Much of the strength was in singles.  Homebuilding in San Diego and Ventura counties continued to lag, with the former down by 10.9% and the latter 33.6% behind.  In Ventura, single family activity remained especially weak.
     In the 9 county Bay Area, the 7-month permit total was down by 14.2% over the year.  Single family permits were up by 7.4%, but multi-family was down by 38.7%.  (Jack Kyser)
 

MIXED TRENDS IN NONRES CONSTRUCTION

     At the 7-month mark, nonresidential construction activity in Southern California continued to twist and turn.  In Los Angeles County. industrial permit valuations were down over last year by 13.5%, while office was behind by 72.9%.  Retail permit values were still ahead, by 11.6%, but the difference was narrowing.  In Orange County, industrial and retail permit values continued to lag last year, by 78.5% and 17.1% respectively.  Moreover, office permit values fell behind last year, down by 15.4%.
     In the Riverside-San Bernardino area, all three sectors were running behind last year, with industrial off by 23.8%, office down by 22.4%, and retail off by a comparatively modest 2.7%.  In San Diego County for the first 7 months, the office and retail sectors continued to lag, by 12.4% and 6.1% respectively.  However, industrial permits inched ahead of last year by 4.6%.  In Ventura County, industrial and office permit values continued to run behind last year, by 61.9% and 83.3% respectively.  But retail continued to run ahead by 29.9%.
     In the 9-county Bay Area for the first 7 months of the year, all three sectors continued to lag.  Industrial was down by 44.4%, office was off by 66.3%, while retail trailed by 6.1%.  (Jack Kyser)
 

MTA RIDESHARE WEEK

     This week is MTA's Rideshare Week.  Try any of the alternatives and compare your time and money savings: http://www.socalcommute.org/index.asp
 

7TH ANNUAL EDDY AWARDS DINNER -- A night to share in the lives of some of the great visionaries of our time.  (Repeat announcement)

     The Eddy Awards are in recognition of excellence in economic development.  The Eddy Award recipients this year have all played an essential role in the evolution of the new downtown LA --they have changed its landscape and made it rich with culture, architecture, opportunity, entertainment and spirit.  More than anything, they've given Los Angeles the vitality necessary to become the thriving metropolitan center that anchors the economy surrounding it.  Please join us on October 10th at the new Cathedral of our Lady of the Angels when the LAEDC awards seven outstanding honorees: Eli Broad, Timothy J. Leiweke, James A. Thomas, Cardinal Roger Mahony, Andrea L. Van de Kamp, Stephan D. Smith and Tonian Hohberg.  Please visit http://www.laedc.org/events/7th_eddy.shtml for more information.
 

BIOMED NETWORKING FORUM

     You are invited to the Southern California Biomedical Council's 30th Biomedical Industry Networking Forum.  It will be held at the Wilshire Grand Hotel on Tuesday, October 22nd, from 5pm to 9pm.  Please visit http://www.socalbio.org/Calendar/october2002.htm for more information.
 

AUTO INDUSTRY IN SOUTHERN CALIFORNIA

     "What auto industry?" you may ask.  It's another one of those "stealth" industries in the L.A. area.  Come find out the unnoticed auto design and research capabilities of Southern California, along with other manufacturing and supporting operations.  The breakfast conference "California: the New Motor Capital" will be held on Wednesday, Oct. 16 at the Anaheim Convention Center.  Please visit http://kfwb.com for more information.
 

AeA FINANCING CONFERENCE

     The AeA presents a conference focusing on financing.  Issues related to financing and the current trends will be discussed.  AeA members will have opportunities to meet with potential investors.  The conference will be held at the Skirball Cultural Center on Wednesday, Oct. 9th.  Please visit http://aeanet.org/events/lavn_capsourcesconf.asp for more information.
 

LAEDC ECONOMIC REPORTS AVAILABLE ONLINE

     In case you missed the notice last week: you can now download LAEDC's various economic reports free-of-charge now at http://laedc.info (yes, ".info" is a valid web address extension).  LAEDC.info is our latest effort to bring you up-to-date, useful, and locally focused economic information that can help your business expand.
 

TRADE SHOWS LISTINGS (Repeat announcement)

     LAEDC is now compiling a comprehensive listing of trade shows in Southern California.  Please send us such information.  Thank you so much.
     Our current listing includes fashion/apparel, textiles, shoes, home furnishings & giftware, and manufacturing.  It's available at http://www.laedc.org/trade_shows.html
 

HOLIDAY NOTICE

     LAEDC will be closed this coming Monday, Oct. 14, in observance of Columbus Day.  e-EDGE will be released on Tuesday, Oct. 15.
 

QUICK STATS:

* Autodata Corp.: US vehicle sales for 9/02: -12.4% (8/02: +3.3%)
* BLS: US unemployment rate for 9/02: 5.6% (8/02: 5.7%)
* BLS: US nonfarm employment for 9/02: -43,000 (8/02: +107,000)
* Census: US construction spending for 8/02: -0.4% (7/02: -0.1%)
* Census: US new factory orders for 8/02: -0.0% (7/02: +4.4%)
* Census: US factory shipments for 8/02: -1.5% (7/02: -1.3%)
* Census: US unfilled factory orders for 8/02: +0.5% (7/02: +0.4%)
* Census: US factory inventories for 8/02: -0.2% (7/02: -0.2%)
* Federal Reserve: US consumer credit for 8/02: +% (7/02: +%)
* Inst. for Supply Mgmt.: US manufacturing Purchasing Managers' Index for 9/02: 49.5% (8/02: 50.5%)
 

QUICK REMINDERS:

* AeA Financing Conference: Wednesday, Skirball Cultural Center, 818-226-3800

The Economic Data Global Express (e-EDGE) is a free service of the Los Angeles County Economic Development Corporation (LAEDC). Permission to quote any proprietary part of this release is granted given proper credit. Distribution is allowed provided that no modifications are made to the original content. Sponsors of this service do not necessarily endorse all opinions stated herein. For more information, please e-mail to research@laedc.org. To contact LAEDC, please call 213-622-4300.

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