Leading Indicators

The Index tracks three leading indicators to get a sense of the direction of change in the county economy in the near future. The three leading indicators are (1) number of help-wanted advertisements in the Eureka Times-Standard, (2) number of claims for unemployment insurance, and (3) number of building permits issued. The graphs in this section use a four-month moving average of seasonally adjusted index values in order to "smooth" ordinary month-to-month volatility and reveal underlying trends.


Employment Leading Indicators:

The Index of Help Wanted Advertising is an indicator of new job creation and producer confidence. In March, the four month moving average of job advertisments continued an upward trend.

The index of claims for unemployment insurance is an indicator of negative economic activity.  In March new claims for unemployment insurance fell. Increasing employment coupled with decreasing claims for unemployment insurance provide a positive signal for future labor market conditions in Humboldt County. 

Manufacturing Leading Indicator:

The manufacturing orders leading indicator gives insight to future trends in the local manufacturing industry. In March the four month moving average of manufacturing orders declined slightly, but remains at a higher level than was seen during the same time last year.


Home Sales Economic Indicator:

The index of building permits issued gives insight to future home sales and construction. Though the total number of permits issued increased in March, when smoothed with a four month moving average, the Index value showed little change from last month.

 

Individual Sectors

Home Sales

Home prices in Humboldt County set a new record high in March, with a median priced home costing $232,900. Statewide home prices leveled off, but remain historically high. Statewide home prices resumed an upward trend after leveling off briefly last month. "The median price of a home continued its run of double-digit price increases last month as buyers scrambled to purchase homes amid concerns of rising mortgage interest rates," said C.A.R. President Ann Pettijohn. "This unprecedented demand helped push the median price of a home in many regions in the state to record highs in March. And at $428,280, the median price for the state also hit a record high in March compared to $351,130 just one year ago." (www.car.org)

Graphic Description: The Humboldt County Housing Affordability Index is compiled by the Humboldt Association of Realtors, and shows the percentage of households that can afford a median priced home in Humboldt County. Data for 2004 is not yet available.

According to the country's largest mortgage company, Freddie Mac, the nationwide average for a 30-year fixed rate mortgage as of April 29th, was 6.01 percent with an average 0.7 points. "With financial markets more optimistic that the economy is expanding nicely, mortgage rates had no where to go but up this week," said Amy Crews Cutts, Freddie Mac deputy chief economist. "Then, as a result of Gross Domestic Product (GDP) figures released today, the market began weighing which part of GDP it feels is most dominant, growth or inflation." (www.freddiemac.com)

Retail Sales

Nationwide retail sales, as reported by The Commerce Department, continued to increase steadily in March. Seasonally adjusted sales were $333.0 billion, an increase of 1.8 percent (±1.0%) from the previous month and up 8.2 percent (±1.0%) from March 2003. The increase was again led by building material and garden equipment suppliers which increased 20.8  percent from March 2003. Food services and drinking places increased 11.1 (±2.3%) percent from March of 2003. (census.gov) 

The latest release from the Conference Board shows that consumer confidence is on the rise. The Consumer Confidence Index, which now stands at 92.9, is up 4.4 percentage points from the previous month's revised number. “This latest improvement in consumer confidence was sparked by a more favorable assessment of current business and labor market conditions and increased consumer optimism about the next six months,” says Lynn Franco, Director of The Conference Board’s Consumer Research Center. “The job market, which has a major impact on confidence, appears to be gaining strength. The percentage of consumers claiming jobs are hard to get is now at its lowest level since November 2002, and more consumers expect this trend to continue.” (www.conference-board.org)

Hospitality

While residents have been enjoying the beautiful spring weather, the tourists are missing out. March occupancy rates in Humboldt County have remained low, and the hospitality index declined 1.2 percent to 87.4. As we move into late spring and early summer, the hospitality sector should expect to see a turnaround.

Gasoline Prices

Average Price* (as of /)		Change From Prev. Month (cents/gal.)
Eureka	$2.26	¢
Northern CA	$2.19	¢
California	$2.21	¢
Current average price per gallon of self-serve regular un- leaded gasoline as reported by the American Automobile Association's monthly gas survey (www.csaa.com).

Electricity Consumption

• January's electricity index which was originally reported at 114.4, was revised up to 117.2.

• February's electricity index which was originally reported at 110.5, was revised up to 119.0.
  

Total County Employment

The index value of the employment sector is based on seasonally adjusted total employment as reported by the Employment Development Department.

In the preliminary report for March, the EDD reported that 56,700 people were employed in Humboldt County. This is up from February's revised figure, indicating a net gain of 600 jobs. The total civilian labor force increased by 500 people to 61,000. The seasonally adjusted total county employment index rose in March by 0.3 percent, and now stands at 104.8. 

Sectoral changes in Humboldt County employment:

• The service sector gained back some of the jobs which were lost eariler in the year. Professional-business, educational-health, food, and other services each gained 100 jobs.
  
• Government employment increase in March. State education gained 200 jobs, and local government gained 100 jobs.
  
• Employment in wood product manufacturing and construction were stable in March. While food manufacturing employment increased by 100 jobs.
  
• Employment in the agricultural sector did not change.
  

March's unemployment rate declined slightly from February's revised level, but still remains above the state and national rates. The increase in the size of the labor force dampened the effect of job gains on the unemployment rate. 

Lumber Manufacturing

In March the lumber-manufacturing index jumped 10.2 percent from last month's revised figure of 77.7. The measure now stands at 85.6.

Economic activity in the manufacturing sector, as measured by the Institute of Supply Management, registered the 11th consecutive month of growth in April. Though the ISM Index level declined 0.7 percentage points from March's revised number, to register 62.4 percent, a number higher than 50 percent still indicates growth. "The second quarter is off to a very strong start. Many respondents indicate that order backlogs are growing for the first time in several years," said Norbert J. Ore, C.P.M., chair of the Institute for Supply Management. "The list of metals up in price is quite extensive — almost every category of product has seen price movement." (www.ism.ws.cfm)

The Bigger Picture

Global Economic News
An interim ruling by the World Trade Organization on April 26th declared that U.S. agricultural subsidies to cotton farmers are illegal under international trade rules. The case was brought to the WTO by Brazil which claims that U.S. subsidies to cotton producers exceed the limits agreed upon in the Uruguay Round of trade negotiations. The $3 billion in subsidies handed out to American cotton producers allows them to produce a greater quantity of cotton than would be produced under normal market conditions. This over-production increases the available supply, thereby driving down the world price of cotton. Millions of people in low income countries whose livelihoods depend on cotton production are being pushed further into poverty by the artificially low prices. Producers in these low income countries are at a competitive disadvatage for two reasons. First they must operate without large amounts of financial support from their governments. Second, as the price of cotton decreases, they must produce more just to maintain the same level of revenue. (economist.com)

National Economic News
An interesting follow up to last month's local spotlight on the cost of economic crimes comes from the San Francisco Chronicle. A look into recent white collar crime scandals reveals a disturbing pattern. A majority of executives who are prosecuted for corporate fraud don't pay their own legal fees. Company shareholders and insurers often pick up the bill instead. Even while under investigation for defrauding shareholders, executives will often be advanced legal fees by their corporation. This is exactly what happened with Frank Quattrone, a former investment banker at Credit Suisse First Boston, who during two trials had his company foot the bill for millions of dollars in legal fees. If an executive is convicted, the company could seek reimbursement; however it is not likely that legal fees would be recovered. Some defendants will choose to fund their own defenses, such as former Enron CEO Jeffrey Skilling who has already paid out $23 million to his defense team. Either way, the risk of financial mismanagement should increasingly become a concern for investors. (sfgate.com)

On a similar note, Federal Reserve Bank Chairman Alan Greenspan commented recently on the risks of running large federal budget deficits. "Our fiscal prospects are, in my judgment, a significant obstacle to long-term stability because the budget deficit is not readily subject to correction by market forces that stabilize other imbalances," said Greenspan. Budget deficits can lead to higher interest rates and the crowding out of business investment. (wsj.com)

• Half of interviewees listed the goal of helping local small business, and 30 percent listed the goals from Prosperity, the County of Humboldt's Comprehensive Economic Development Strategy: Focus on growing base industry clusters, support business growth and development, enhance our competitive edge, invest in our business, enhance regional quality of life. 

• Half of interviewees listed the goal of restoring, enhancing, and sustaining natural capital, including natural resources, ecosystems, and degraded watersheds.

• Nearly half of the interviewees listed the goal of enhancing regional quality of life.

• Nearly 40 percent of interviewees listed the goal of creating regional energy and/or food self-sufficiency.

• Nearly 45 percent of interviewees suggested promoting entrepreneurship and small/local business development.

• 35 percent of interviewees suggested providing education to area residents about sustainable development principles and practices.

• One-third of interviewees suggested building consensus among area residents about sustainable development principles and practices.

• Slightly more than one quarter of interviewees suggested reinvesting in natural capital, such as watershed restoration.

• Slightly more than half of interviewees listed existing patterns of development, infrastructure, products, prices, and/or ways of life that reinforce the status quo.

• More than one-third of interviewees listed the cultural divide in the region that gets in the way of consensus and general acceptance of specific sustainable development strategies.

• More than one-third of interviewees listed residents' values and preferences relating to consumerism, "affluenza", and/or unsustainable lifestyle expectations.

• One third of interviewees listed the existing power structure and its influence on economic development and governance, regionally, statewide, and nationally.

Explanatory Note: For those of you who are new or less familiar with the Index, we have been tracking economic activity since January 1994. The composite indices plotted as blue and red lines in the diagram at the top of this page are weighted averages of each of the six sectors described in the table above. Each sectoral index, and the composite index, started at a value of 100 in 1994. Thus if the retail sectoral index value is currently 150, that means that (inflation-adjusted) retail sales among the firms that report data to us are 50 percent higher than in January 1994. We also seasonally adjust each sector, and the composite index, to correct for "normal" seasonal variation in the data, such as wet season vs. dry season, and so trends in the seasonally-adjusted composite index provide a better indication of underlying growth and fundamental change in the economy. Each month's report reflects data gathered from the previous month.  For example, the "August 2003" report reflects data from July 2003.  As is common, our initial report is preliminary, and as we receive final data we revise our reports accordingly.

Cited References

The Eureka Times-Standard web site

The San Francisco Chronicle web site

The New York Times web site

California Association of Realtors web site

National Association of Realtors web site

Freddie Mac web site

American Automobile Association web site

The Conference Board web site

Institute of Supply Management web page

U.S. Bureau of the Census's home page

U.S. Bureau of Economic Analysis' web page

U.S. Bureau of the Census's Economic Briefing Room web page

U.S. Bureau of Labor Statistic's web page

The Federal Reserve Bank's Beige Book web page

The Milwaukee Journal Sentinel

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Copyright © 2004 Erick Eschker