The Economic Data Global Express (e-EDGE)

v.6 n.45       Released Nov. 12, 2002
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

STATE/LOCAL UNEMPLOYMENT RATES MOSTLY DOWN IN OCTOBER

     California's unemployment rate was 6.4% last month, unchanged from July, August, and September and a little below this year's peak of 6.5% reached in June, April and March.   The state's jobless rate was 5.9% in October 2001.  Meanwhile, the U.S. unemployment rate increased by 0.3 percentage points over the past 12 months, from 5.4% to 5.7%.  (These figures are all adjusted to eliminate normal seasonal variation.)
     Jobless rates at the county level are not seasonally adjusted.  Los Angeles County's jobless rate was 6.1% last month, well down from the September reading of 6.7%.  Ventura County's jobless rate fell by 0.4 percentage points to 5.4%.  Joblessness fell by 0.1 percentage point to 4.0% in Orange County and to 6.5% in Riverside County.  Meanwhile, the unemployment rate was unchanged in San Bernardino County at 5.6%.  Los Angeles County's jobless rate was slightly below last October's jobless rate of 6.2%.  Jobless rates were higher in the other four counties:  by 0.7 percentage points in San Bernardino County, by 0.6 percentage points in Riverside County, by 0.5 percentage points in Ventura, and by 0.4 percentage points in Orange County.  San Diego's unemployment rate was 4.2% last month, even with September and 0.5 percentage points higher than last year.
     The Southern California (5-county) jobless rate has increased by 0.2 percentage points over the past 12 months to 5.7%.  This was well below July's cyclical high of 6.6%.  In the Bay Area, the combined 9-county unemployment rate was 6.1%, the same as August and September and a bit below July's high water mark of 6.3%.  Last month's unemployment rate in the Bay Area was still 0.8 percentage points above the October 2001 level of 5.3%.  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 7.9%, highest of the year and much higher than the October 2001 rate of 6.9%.  San Francisco and Alameda counties also had high jobless rates in October, the former at 6.7% and the latter at 6.5%.   (Nancy D. Sidhu)
California PR: http://www.edd.ca.gov/nwsrel11.htm
Cal. & LA unemployment data: http://www.calmis.cahwnet.gov/file/lfmonth/cal1$pr.txt
 

OCTOBER JOB NUMBERS  -- ANY SIGNS OF LIFE?

     On the surface, the October employment data from the California Employment Development Department seemed to point to an economy that is still struggling to gain traction.  But there were some positive hints.  For example, the state's job count increased from September to October.  While the last month's total was below a year-ago, the decline of 22,900 was the smallest since January.  The manufacturing sector continued to shed jobs over the year, with a loss of 64,700 in October, and the on-going announcements of job cuts in the tech sector do not bode well.  Still, wholesale and retail trade and government continued to add jobs over the year.   In "services," the year-to-year job loss of 1,400 was the smallest since February.  However, there was no help from business services which declined over both the month and year.
     Around Southern California, Los Angeles County posted a job increase from September to October, but was still below last year by 23,000 jobs.  The manufacturing sector was down by 20,300 jobs over the year, but again there was a hint of good news.  The long suffering aircraft and parts sector seems to be bottoming out, with the job count up modestly since August.   In addition, employment in apparel manufacturing seemed to be moving sideways.  "Services" was even with last year, helped along by improving trends in motion picture production.  Even so, the job count in the industry' was below last year by 3,500.
     Orange County's nonfarm job total recorded the 3rd month in a row of year-to-year losses in October, dropping by 4,400.  In the loss column were construction, manufacturing, transportation/communications/utilities, wholesale and retail trade, and government.  The County's "service" sector was unchanged from last year, with job losses in business services and amusements.  Ventura County's October employment count was also down by 500 jobs over the year.  The only strength was in government, finance/insurance/real estate, and retail trade.
     The employment news from the Riverside-San Bernardino area continued to be positive in October, with an increase over the year of 23,500 jobs.  The area's manufacturing sector continued its modest recovery, although the job count took a seasonal slide from September to October.  The largest job gains over the year were found in "services," up by 7,700, while retail trade and government were tied with 5,100 new jobs each.  San Diego County's nonfarm employment was up by 21,600 jobs over the year in October, with the biggest gains found in services (+9,900) and retail trade (+7,900).
     There was little improvement in the Bay Area's employment situation in October.  The Oakland area lost 3,300 jobs over the year, while the San Francisco area slipped by 31,600.  San Jose was down by 31,900 jobs.  (Jack Kyser)
 

IMPLICATIONS OF THE FED'S AGGRESSIVE RATE CUT

     The decision of the Federal Reserve to cut its key Federal Funds Rate (FFR) by 50 basis points last Wednesday shocked some observers by its magnitude and others (like this author) who expected no cut at all.  To put this action in perspective, the FFR had been left unchanged since December 2001, and at 1.75%, was at a 40-year low.  It appears that a series of bad news about the economy's condition during the two weeks prior to the Fed's November 6th meeting influenced the policy decision.  Consumer confidence plunged, durable goods orders sagged, more jobs were lost, and there was the continuing unsettling rhetoric over Iraq.
     The official statement of the Fed announcing its rate decision cited "the uncertainty of economic data and heightened geopolitical uncertainty."  Let us examine each of these to understand the logic and analysis behind the Fed's policy action.  First, on the heels of a fairly decent 3rd quarter performance (3.1% annual rate of increase in GDP), we assume that the Fed's economic forecasting model is predicting significant deterioration in consumer spending and/or a failure of business investment to strengthen in the final quarter of 2002 and the first half of 2003. What can the Fed do to fix this?  The Fed does not have the ability to create corporate earnings that would convince CEOs and their Boards to invest more and hire more workers.  The Fed cannot change consumers' attitude about their debt levels, their job and income security, and their overall concerns about military conflict.
     On the geopolitical front, the Fed apparently believes that there is now a greater probability of the U.S. leading an invasion of Iraq and that the negative impact of such a development on consumer and investor confidence will be damaging to the economy. Also, an ensuing oil price spike would act as a tax increase on households and businesses.  Again, military conflict of this sort is outside of the Fed's sphere of influence.
     The response of the European Central Bank and the Bank of England to the Fed action was also significant.  The ECB voted the day after the Fed's rate cut to keep its key interest rate at 3.25% and the BOE kept its base rate at 4.00%--both unchanged since the end of last year.  The aggressive rate cut by the Fed has resulted in "zero or near-zero" real rates, whether one applies the core CPI, GDP implicit deflator, or the personal consumption price deflator to the nominal 1.25% Federal Funds Rate.  This is not attractive to investors, foreign or domestic and could impair capital inflows to the U.S. and also weaken the dollar.
     The new lower interest rates may spur a little more borrowing, investing, and spending in the months ahead.  They will also squeeze investors and retirees who depend on interest income. However, the outbreak of a war, say in the first quarter of 2003, will obliterate any economic impetus.  We wish the Fed the best with a very delicate and frustrating situation.  They will revisit the problem on December 10th.  (Ken Ackbarali)
FOMC statement: http://www.federalreserve.gov/boarddocs/press/monetary/2002/20021106/
 

CALIFORNIANS HAVING A HARD TIME AFFORDING A HOUSE

     Housing affordability remains an issue for Californians.  The California Association of Realtors (CAR) reported that the Housing Affordability Index (HAI), which measures the percentage of households that can afford to purchase a median-priced home, slipped five percentage points in September compared to a year ago.  The September HAI was at 28%, down five points from a revised 33% in September 2001.  CA Condos are more attractive with an HAI reading of 45%.  Los Angeles County, although unchanged from last month's reading, was down five percentage points with a reading of 30%.  Orange County also remained the same at 23% but still down from 30% a year ago.  The Riverside-San Bernardino area, one of the most affordable regions in Southern California, had an HAI reading of 45%, down three percentage points from last year.  Ventura County, while unchanged from the previous month's reading of 30%, also was down from the revised 33% a year ago.  San Diego was the least affordable region in Southern California with an HAI reading of 21%.  Although it showed a one percentage point increase from last month's reading, the area was still down 4 percentage points from a year ago.
     Up north, San Francisco Bay Area's HAI reading stood at 20%, down from 23% a year ago.  The Santa Clara region's HAI of 26% was up one percentage point from the previous month and just a tad lower from last year's 27%.  The High Desert area continues to be the most affordable region in California with an HAI reading of 66%.  (Candice F. Hynek)
PR: http://www.car.org/index.php?id=MzE0NDI=
 

LOCATION PRODUCTION DAYS UP IN OCTOBER

     According to the Entertainment Industry Development Corporation, off-lot film production days in October were up by 37.7% over the year.  Supplying the strength were "features," up by 109.3%.  The month's total of 835 days was down from September's count of 930, but was still the second highest this year.  TV production days were up by 30.8%, while commercial activity was ahead of last year's total by 13.1%.
     The movie industry also continued to do well at the box office.  The dollar total for the year-to-date is ahead by 15.1%, with the number of admissions up by 12%.  The year should finish with a flourish, as Harry Potter, James Bond and the Lord of the Rings are all coming.  (Jack Kyser)
 

ENERGY WATCH -- HIGHER PRICES ARE HERE TO STAY

     Two major decisions were released by the California Public Utilities Commission (CPUC) on Thursday.  First, the current surcharge on electric bills, which brings in around $5 billion a year, will be continued.  The "surplus" generated by the surcharge will be used to help utilities pay down their debts incurred before the State stepped in to purchase power.  The plan will give SCE $3 billion and PG&E around $4.7 billion.  Second, the CPUC voted to cap the fees that direct access customers have to pay to the State at $0.027/kWh.  Direct access users buy power directly from power suppliers instead of the utilities, and thus they were not hit directly by the higher rates imposed by the CPUC.
     Since California signed those long-term power contracts in 2001 (and sometimes bought more power than actually needed), spot market prices for electricity have dropped significantly and direct access users ended up benefiting from the State's power purchases indirectly.  Yet because California consumers have to pay for every bit of juice contracted (even if it was not really needed), additional enrollments in the direct access plan mean fewer customers end up paying for the same amount of pre-arranged power purchases.  New enrollment into the direct access plans were suspended by the CPUC in late 2001, and customers enrolled after February 2001 were forced to pay extra fees to compensate for the higher costs that non-direct access customers had to pay as a result of their enrollment in the direct access plan.  The direct access fees are controversial.  Critics argue that the $0.027/kWh fees are not high enough to cover the State's true costs, and hence direct access customers are in essence getting a subsidy from all other users.
     In other news, the State is busy suing power producers for refunds and re-negotiations on the long-term contracts signed last year.  So far Williams Cos. has settled with the State.  (George Huang)
CPUC PR: http://www.cpuc.ca.gov/static/announcements/direct+access+surcharges.htm
 

PORT STATUS UPDATE

     Nothing much to report this week, except that the number of ships in and around the twin ports declined from 93 on Monday, 11/4, to 53 on Saturday (11/9, the latest data posted).  The Marine Exchange said this number is around the high end of the normal load.  One reason for the faster-than-expected unwinding: fewer ships were coming in compared to the pre-shutdown days.  No doubt some are still sailing back to Asia after waiting for weeks at the ports.  Currently on the negotiations table: pensions.  PMA had offered a 25% increase over five years, but ILWU said this is not enough.  Negotiations will re-start tomorrow.  (George Huang)
 

OPEN SKIES AGREEMENTS -- WHAT'S THE BIG DEAL?

     The European Court of Justice (ECJ) ruled last week that the bilateral "open skies" agreements between eight of the EU nations and the US are illegal, giving a partial victory to the European Commission which argues that only the Commission has the authority to negotiation such trade agreements.  Open skies agreements allow airlines from two countries to have unlimited access to each other's domestic markets.  On the surface it looks like open skies agreements promote competition.  In reality, the ones signed by those eight nations and the US were rather protective of their national flag-carriers, many of whom are inefficient when compared to the new breed of no-frills airlines such as easyJet and Ryanair.  The ECJ ruled that because of the special privileges given to national flag-carriers, these agreements are discriminatory and thus illegal.  The European Commission wanted to void these agreements and promote a "single sky" policy where the whole EU block will negotiate with the US and get more leverage from its market size.  The Commission also wants to promote mergers among the flag-carriers so they can gain economies of scale and hopefully become more competitive.
     A "real" open skies agreement between the EU and the US also will affect airlines' choice of aircraft used.  Right now most trans-Atlantic travel goes through the big hub cities such as New York, Washington DC, London, and Paris.  Such a hub system favors large aircraft such as Boeing 747-400s and the forthcoming Airbus 380s.  If airlines can roam freely and set up flights based on market demand, we will see regularly scheduled, non-stop flights between more destinations (e.g., Houston to Frankfurt).  More emphasis on point-to-point travel means more demand for smaller aircraft with extended range, such as Boeing 777s and Airbus A340s.  So this fight over who rules the European skies will affect not only airline ticket prices and options in the future, but also what aircraft get produced.  Airbus is gambling $11 billion on the mega jumbo A380 while Boeing wants to improve efficiency and range on smaller jets.  (George Huang)
ECJ PR: http://curia.eu.int/en/cp/aff/cp0289en.htm
 

HOW'S YOUR SCHOOL DOING?  (Repeat announcement)

     The California Department of Education (CDE) released the 2002 Academic Performance Index last month.  We've processed the five-county school data into easy-to-print formats for your convenience.  Only key information are included (2002 and 2001 APIs, major racial distribution, API for major racial groups, and teacher credential information).  We are not able to answer any questions about the APIs, however.  Please direct your questions to your local schools or the CDE.  We will delete these files from our system next week, and so please download them if you think you might need it in the future.  Thank you.  (George Huang)
Cal. Dept. of Educ. API site: http://api.cde.ca.gov/
High schools (9 pg.): http://www.e-edge.org/special/API-2002-High.pdf
Middle schools (13 pg.): http://www.e-edge.org/special/API-2002-Middle.pdf
Elementary schools (54 pg.): http://www.e-edge.org/special/API-2002-Elem.pdf
Small schools (2 pg.): http://www.e-edge.org/special/API-2002-Small.pdf
 

WEEKLY POLL: FOR RETAILERS ONLY -- LET'S TRY AGAIN

     (Note: this is a poll for retailers only.  We hope to gauge the upcoming holiday season with this brief poll.)  Question of the week: Did the port shutdown affect your holiday merchandise arrival?
http://poll.peter365.com/cgi-bin/poll.pl?pollid=482&subp=6 <--last week I gave the wrong code, sorry!
 

VARIOUS EVENT CALENDARS

     To prevent the e-EDGE from listing too many events, we encourage you to visit our events pages:
LAEDC events: http://www.laedc.org/data/events/index.shtml
World Trade Center Association events: http://www.wtcanet.org/index_event.htm
LAEDC's economic development-related events: http://www.laedc.org/events/calendarevent.asp
 

SOUTHERN CALIFORNIA INTERNATIONAL TRADE CONFERENCE (Repeat announcement)

     The 2002 Southern California International Trade Conference will be held on Friday, Nov. 15th, from 7:30am to 2:30pm at the Hilton Universal.  It is presented by Port of LA, LA World Airports, Valley Int'l Trade Association, and Economic Alliance of the San Fernando Valley.  Please call 818-379-7000 for more information.
 

BIOMED NETWORKING FORUM (Repeat announcement)

     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.
 

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:

* Cal Assn of Realtors: California Housing Affordability Index for 9/02: 28 (8/02: 28)
* Cal Assn of Realtors: LA County Housing Affordability Index for 9/02: 30 (8/02: 30)
* Cal EDD: California unemployment rate for 10/02: 6.4% (9/02: 6.4%)
* Cal EDD: California nonfarm employment for 10/02: +39,800 (9/02: +66,800)
* Cal EDD: LA County unemployment rate for 10/02: 6.1% (9/02: 6.5%)
* Cal EDD: LA County nonfarm employment for 10/02: +14,000 (9/02: +23,600)
* Census: US wholesale trade for 9/02: +0.1% (8/02: +0.8%)
* Census: US wholesale inventories for 9/02: +0.5% (8/02: +0.1%)
* BTM/Schroders: US chain store sales for 10/02: +3.1% (9/02: +1.6%)
* BLS: US nonfarm labor productivity for 2Q02: +4.0% (1Q02: +1.7%)
* BLS: US nonfarm unit labor costs for 2Q02: +0.8% (1Q02: +2.2%)
* Federal Reserve: US consumer credit for 9/02: +7.2% (8/02: +4.0%)

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