The Economic Data Global Express (e-EDGE)

v.6 n.41       Released Oct. 15, 2002
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

SEPTEMBER JOBS REPORT LACKLUSTER

     The September nonfarm employment report from the California Employment Development Department was a touch confusing.  The seasonally adjusted total job count declined by 15,800 jobs from August to September, while the unadjusted data increased by 68,000.  However you read it, the data pointed to an economy that was struggling to gain traction.   Manufacturing continued to decline, with the loss of 69,800 jobs over the year.   Services also was down by 10,900 jobs, but that was the smallest drop in several months.  The business services component remained weak with the loss of 39,700 jobs, but personnel services (temporary help) has started to show some signs of life.
     Around Southern California, the September jobs news was mixed.  Nonfarm employment in Los Angeles County was down over the year by 0.7% or by 30,200 jobs.  Manufacturing dropped by 21,100 jobs, while services declined by 6,200.   This was the smallest loss since October of last year.  Motion picture production was down by 6,100 jobs over the year, the smallest loss since July, 2001 when the industry started to slide into the "de facto" strike swoon.  The travel and tourism sector continued to struggle, with hotel employment down over the year by 2,200 jobs, and amusements off by 1,200.
     The September data for Orange County struck a sour note.  Nonfarm employment in the County was down over the year for the second month in a row, with a decline of 0.2% or 2,900 jobs.  Manufacturing was off by 4,900 jobs, while retail declined by 2,500 (a sign of weak tourism).  The County's service sector has moved sideways since June, with the September total up over the year by just 800 jobs.
     The news from the Riverside-San Bernardino area was more upbeat, with nonfarm employment in September 2.7% ahead of last year or by 28,400 jobs.  Government was ahead by 10,600 jobs, while services advanced by 8,600.  Moreover, the area's manufacturing sector continued to inch ahead.  San Diego County also continued to record good growth in September, up by 1.8% or by 21,900 jobs.  Setting the pace were services, with an increase of 10,700 jobs, and retail trade, up by 7,100.  However, manufacturing continued to slide, down by 2,500 jobs over the year.  Ventura County was on the wrong side of the bubble, with September the third month in a row of year-to-year job losses.  The month was down by 0.1% or by just 200 jobs.   The County's manufacturing sector is moving sideways.
     The September job numbers for the Bay Area continued to make unpleasant reading.  The Oakland metro area posted a decline over the year of 6,000 jobs, while the San Francisco metro area was off by 35,600.  The San Jose area was behind by 34,700 jobs, but this was the smallest decline so far.  (Jack Kyser)
PR: http://www.edd.ca.gov/nwsrel10.htm
Data: http://www.calmis.cahwnet.gov/file/lfmonth/cal1$pr.txt
 

STATE/LOCAL UNEMPLOYMENT RATES MOSTLY DOWN IN SEPTEMBER

     California's unemployment rate was 6.3% last month, down a bit from 6.4% in August and July and from this year's peak of 6.5% reached in June, April and March.  The state's jobless rate was 5.7% in September 2001.  Meanwhile, the U.S. unemployment rate increased by 0.6 percentage points over the past 12 months, from 5.0% to 5.6%.  (These figures are all adjusted to eliminate normal seasonal variation.)
     Jobless rates at the county level are not seasonally adjusted.  Typically, employment rises in the month of September, while the number of unemployed workers falls.  Southern California county unemployment rates all followed the usual pattern last month.  Los Angeles County's jobless rate was 6.5%, well down from the August reading of 7.0%.  San Bernardino County's jobless rate fell by 0.2 percentage points to 5.4%.  Joblessness in the other three counties fell by 0.1 percentage point: to 4.0% in Orange County, to 6.5% in Riverside County, and to 5.7% in Ventura County.  Compared to September 2001, last month's jobless rates were all higher:  by 0.4 percentage points in Los Angeles and Ventura counties, and by 0.6 percentage points in Orange, Riverside and San Bernardino counties.  San Diego's unemployment rate was 4.1% last month, down from 4.2% in August and 0.6 percentage points higher than last year.
     The Southern California (5-county) jobless rate has increased by 0.5 percentage points over the past 12 months to 5.9%.  This was below July's cyclical high of 6.6%.  In the Bay Area, the combined 9-county unemployment rate was 6.0%, down from 6.1% in August and 6.3% in July, which appears to be that area's cyclical high. Last month's rate was 1.1 percentage points above the September 2001 level of 4.9%.  However, the year-to-year margin has been dropping for several months.  San Jose has experienced the worst of the area's problems.  Last month's jobless rate was 7.7%, much higher than the September 2001 rate of 6.3%, and not much below the June-July peak of 7.8%.  San Francisco and Alameda counties also had high jobless rates in September, the former at 6.7% and the latter at 6.4%.  (Nancy D. Sidhu)
CA data: http://www.calmis.cahwnet.gov/file/lfmonth/cal$pr.txt
LA County data: http://www.calmis.cahwnet.gov/file/lfmonth/la$pr.txt
 

FOREIGN DIRECT INVESTMENT PLUNGED IN 2001 AND STILL FALLING

     According to the Organization for Economic Cooperation and Development (OECD), a Paris-based think tank, foreign direct investment (FDI) recorded its largest drop in recent  years in 2001.  Total FDI inflows to 30 OECD member countries fell 56%last year, from an all-time record of $1.27 trillion in 2000 to $566 billion in 2001.  Preliminary data for the first half of 2002 indicate that the downtrend is continuing.
     The FDI boom of the late 1990s was fueled by large cross-border acquisitions in industries such as utilities, automobiles, banking, and energy.  Surging stock market valuation, especially in telecoms and other high-tech stocks, was also responsible for the investment boom.  Last year's recession and the 9/11 shock cooled off FDI activity in 2001 and the loss of confidence in financial reporting in the United States has had a devastating impact on FDI flows in 2002.
     With FDI inflows of $131 billion in 2001, the U.S. was far and away the leading recipient of cross-border investment, followed by the Netherlands ($56 bn.), the United Kingdom ($54 bn.), France ($53 bn.), and Belgium-Lux ($51 bn.).  Equally noteworthy is the list of countries that experienced big declines in FDI inflows in 2001 compared with 2000:  Germany -84%, Belgium-Lux -79%, Ireland -58%, Sweden -56%, Canada -56%, the U.K. -55%, the U.S -53%.  On the positive side, four OECD countries went counter to the overall trend and enjoyed increases in FDI in 2001:  Mexico +39%, France +23%, Italy +15%, and the Netherlands +4%.
     The less than stellar economic outlook for the European Union, Japan, and the United States in 2003 is likely to keep investors in a cautious mood with respect to cross-border activity.  In addition, the fragile condition of major Latin American economies (Brazil and Argentina) as well as political and social turmoil in Indonesia are likely to dampen the spirits of foreign investors.  Lastly, and this is the big one, the dark war clouds over the Middle East (Iraq and Israel/Palestine) add to the bitter cocktail that foreign investors are asked to swallow (or sip gingerly).  (Ken Ackbarali)
 

WHOLESALE AND RAW MATERIAL PRICES SEEM STABLE

     The U.S. Producer Price Index (PPI) for finished goods rose by 0.1% in September and was 1.9% lower than the year-ago level.  Food prices dropped by 0.6%, while energy costs rose by 0.9%.  Certain fuel oils saw strong price increases, but wholesale gasoline prices fell by 1.5%.  Excluding food and energy prices, the core PPI for finished goods rose by 0.1%.
     The PPI for intermediate goods rose by 0.5% in September, following a 0.4% increase in August.  Compared to a year ago, the index was 0.5% lower.  Food prices rose by 1.2% and energy prices jumped by 2.5%.  Natural gas prices were significantly higher, especially for electric utilities (+8.6%).  The core PPI rose by just 0.1%.
     The PPI for crude goods rose by 0.6% last month, following a 1.6% surge in August.  Compared to a year ago, the index was 0.8% higher.  Food prices rose by 2.0% while energy prices declined by 0.1%.  Crude petroleum prices rose by 5.8%.  Natural gas prices (at well head) declined by 4.8%.  The core PPI for crude goods fell by 0.6%.
     The port shutdown occurred at the end of the month after the PPI survey was completed, so no price impacts will be visible before the October PPI.  There could be some major fluctuations in food prices because some exports were dumped into the domestic market and some imported items had temporary shortages.  (George Huang)
PR: http://www.bls.gov/news.release/ppi.nr0.htm
 

HOUSING STILL UNAFFORDABLE FOR MOST RESIDENTS

     The Housing Affordability Index (HAI) calculated by the California Association of Realtors shows a dismal prospect for first-time homebuyers in California.  The HAI is the percentage of households that can afford to purchase a median-priced home.  For the State, the HAI was 28% in August, down from 30% a year ago.  In comparison, the US average was 56%, up from 55% a year ago.  Around Southern California, Orange County was the lowest at 23%, down from 27% a year ago.  LA and Ventura counties tied at 30%, and were 34% and 32% a year ago, respectively.  The Inland Empire was the most affordable at 45%, down from 49% a year ago.  A bit to the south, San Diego County was even less affordable at 20%, down from 24% a year ago.  Up north, the San Francisco Bay Area's HAI was 20%, down from 21% a year ago.  Santa Clara County, suffering from the tech crash, saw its HAI unchanged at 25%.  Two years ago, it was 18%.  Around the State, the most affordable area was the High Desert area (in San Bernardino County) at 66%, and the least affordable area was Contra Costa County at 11%.  Thinking of getting a condo instead?  The statewide average HAI for condos was 45%, down from 47% a year ago.  They are nonetheless a good option for first-time homebuyers.  (George Huang)
PR: http://www.car.org/index.php?id=MzEzODE=
 

PORTS OPENED, BUT WHAT NEXT?

     When President Bush invoked the Taft-Hartley Act last week, the ILWU claimed that the Bush Administration sided with PMA in their labor dispute.  Technically, since it was PMA who locked the doors instead of workers refusing to work, the Act seemed like a blow to the PMA which appeared determined to "tough it out" with the ILWU this time.  The Act, however, does allow the PMA to bring the issue of work slowdowns (called "working safe" by ILWU) before the judge, should it happen again.  In any case, the 80-day cooling off period will save many retailers from bankruptcy (the impact of lost Christmas sales), and reduce ILWU's leverage by pushing any work stoppage to after the crucial holiday shipping season.  But will the 80-day "cooling off" period really bring about cooler heads?  Unfortunately past Taft-Hartley actions have not been very successful in getting feuding parties to reach agreements.
     The troubles for U.S. manufacturers, wholesalers, and retailers may not be over, however.  The backlog of 200+ ships will take weeks to clear, which means that some cargo will be quite late.  Some Christmas merchandise may not arrive in time for Christmas, and retailers may have fire sales in January for items still in their warehouses.  Shoppers may not find everything they want either, and one can only guess how they will spend their money.  Perhaps this will be a really big year for gift certificates.  Basically it's a way to postpone Christmas purchases to January when things finally arrive and prices are marked down significantly.  If, however, consumers don't buy gift certificates this holiday season and simply hold on to their money, retailers will really suffer and some will not survive.
     Our trading partners have also been hurt.  Their products couldn't be shipped due to a shortage of containers and ships.  When large U.S. customers exert pressure on shipping companies to ship their stuff before cargo from smaller clients, factories supplying the smaller stores will have difficulty getting container space even when ships are running.  (George Huang)
LAEDC's special coverage on the port labor dispute: http://www.e-edge.org/special/ports.htm
 

SAN GABRIEL VALLEY ECONOMIC OUTLOOK CONFERENCE

     The San Gabriel Valley Economic Partnership invites you to its annual Economic Outlook Conference, being held on this Thursday, Oct. 17, from 8am to 1:30pm at the Doubletree Hotel in Pasadena.  For more information, please call 626-856-3400 or visit http://www.valleynet.org .
 

SOUTH BAY ECONOMIC FORECAST CONFERENCE

     The South Bay Economic Development Partnership invites you to its annual Economic Outlook Conference, being held on Wednesday, Oct. 23, from 1pm to 6:30pm at the Torrance Marriott.  For more information, please call 310-792-0323 or visit http://www.southbaypartnership.com .
 

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.
 

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
 

QUICK STATS:

* BLS: US Producer Price Index for finished goods for 9/02: +0.1% (8/02: +0.0%)
* BLS: US Producer Price Index for intermediate goods for 9/02: +0.5% (8/02: +0.4%)
* BLS: US Producer Price Index for crude goods for 9/02: +0.6% (8/02: +1.6%)
* BLS: US export prices for 9/02: +0.2% (8/02: +0.2%)
* BLS: US import prices for 9/02: +0.7% (8/02: +0.3%)
* BTM/Schroders: US chain store sales for 9/02: +1.5% oya (8/02: +1.8% oya)
* Cal Assn of Realtors: California Housing Affordability Index for 8/02: 28 (7/02: 28)
* Cal Assn of Realtors: LA County Housing Affordability Index for 8/02: 30 (7/02: 31)
* Cal EDD: California unemployment rate (seasonally adjusted) for 9/02: 6.3% (8/02: 6.4%)
* Cal EDD: California nonfarm employment for 9/02: +68,000 (8/02: +15,800)
* Cal EDD: LA County unemployment rate (seasonally adjusted) for 9/02: 6.4% (8/02: 6.6%)
* Cal EDD: LA County nonfarm employment for 9/02: +18,300 (8/02: +1,600)
* Census: US wholesale trade for 8/02: +0.9% (7/02: +0.7%)
* Census: US wholesale inventories for 8/02: +0.2% (7/02: +0.6%)
* Census: US retail sales for 9/02: -1.2% (8/02: +0.6%)
* Census: US business sales for 8/02: +0.2% (7/02: +1.3%)
* Census: US business inventories for 8/02: -0.1% (7/02: +1.4%)
* Federal Reserve: US consumer credit for 8/02: +2.9% annualized rate (7/02: +7.0% a.r.)
* Univ. of Michigan: US Consumer Sentiment Survey for 10/02: 80.4 (9/02: 86.1)
 

QUICK REMINDERS:

* Wednesday: KFWB Power Breakfast -- California, the New Motor Capital, Anaheim Convention Center, 323-871-4676
* Thursday: San Gabriel Valley Economic Outlook Conference, Doubletree Hotel, Pasadena, 626-856-3400

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.

Subscribe to e-EDGE and receive current economic news and major developments.  Your e-mail address will not be disclosed to any outside party (including e-EDGE sponsors) under any circumstances.

To send us comments regarding e-EDGE, please e-mail to research@laedc.org.