INDEX OF ECONOMIC ACTIVITY FOR HUMBOLDT COUNTY

Professor Erick Eschker, Director
Garrett Perks, Assistant Editor
Haley French, Assistant Analyst

This month's report is sponsored by

Redwood Region Economic Development Commission

Jump to: Composite | Leading Indicators | Individual Sectors | Bigger Picture

April 2006

Graphic description: The seasonally adjusted composite Index is represented in the graph above by the blue area.  The red line shows the four month moving average which attempts to demonstrate the overall trend in the data with less monthly volatility.

Composite Index and Overall Performance

The Index of Economic Activity for Humboldt County measures changes in the local economy using data from local businesses and organizations. The data are compiled into a seasonally adjusted Index that shows changes relative to the base month (January 1994). The composite Index is a weighted combination of six individual sectors of the local economy. The current Index is based on the most recently available data, which is generally data from the previous month.

In March, the Index grew 1.1 percent to a composite Index value 109.1 (100 = January 1994).  The Index was pulled down most notably by declines in the Retail Sales and Manufacturing Indices.  The Home Sales, Hospitality and Employment Indices put the greatest upward pressure on the Index.  Seasonally adjusted home sales in Humboldt County was the star performer this month, following last month’s significant decline.  The most interesting story in the March report is the astronomical increase in the Help Wanted Advertising Index.  This is a leading indicator, giving insight into possible future developments in the county job market.  The increase in help wanted advertising in March was totally unprecedented, and may indicate a more comfortable market for job seekers in months ahead.  Also impacting the Index was a 5.9 percent decline in the Retail Sales Index which now stands at 136.8, and a 2.0 percent gain in the Hospitality Index which brings that indicator to 81.4.

Composite & Sectoral Performance, Index of Economic Activity for Humboldt County
* * *		Percent Change From:
Index	Seasonally Adjusted Index Value (1994=100)	Previous Month	Same Month 2005	Same Month 2004	Same Month 2003	Same Month 2002	Same Month 2001
COMPOSITE	109.1	1.1	-1.5	-2.2	5.1	2.7	-0.2
Sector
Home Sales	128.1	36.5	1.9	-15.0	2.9	0.0	12.5
Retail Sales	136.8	-5.9	-2.0	-6.9	-7.0	-2.9	1.0
Hospitality	81.4	2.0	-11.7	-6.9	-7.0	-8.7	-2.2
Electricity Consumption	148.4	0.0	21.3	20.3	25.8	38.4	34.0
Total County Employment	106.1	0.3	-1.0	2.0	5.1	3.2	2.0
Manufacturing	66.2	-3.0	-24.6	-22.7	-11.5	-16.6	-25.9

Key Statistics		Leading Indicators
			% Change From Previous Month
Median Home Price*	$349,500	Unemployment Claims	28.8
30 Yr. Mortgage Rate	6.375	Help Wanted	129.4
Unemployment Rate**	6.0%	Building Permit	-50.2
		Manufacturing Orders	71.3
* Home price data are provided by the Humboldt Association of Realtors. MLS is not responsible for accuracy of information. The information published and disseminated by the Service is communicated verbatim, without change by the Service, as filed with the Service by the Participant. The Service does not verify such information provided and disclaims any responsibility for its accuracy. Each Participant agrees to hold the Service harmless against any liability arising from any inaccuracy or inadequacy of the information.
** Preliminary EDD data (not seasonally adjusted). See the EDD Website for updates.

Individual Sectors

Home Sales

The Index value of the home sales sector is based on the number of new and existing homes sold in Humboldt County each month as recorded by the Humboldt Association of Realtors.

After last month's decline, March saw a large rebound in the real estate Index. The Index rose 36.5 percent, the largest single-month increase since October of 2001.  This more than recouped last month's dramatic loss.  The Home Sales Index now stands at 128.15.  Although considerable territory was gained in March, this Index is still well below the peak reached in June of 2004 when it reached its all time high of 156.95.  The median price of homes sold in March in Humboldt County continued to rise, outstripping February's record level of of $343,450.  The median price is now at a new all time high of $349,500.  The median selling price is not adjusted for inflation and does not affect the Index.  For sale listings in Eureka climbed 12 percent in April compared to March and 34 percent compared to February.

The housing market in other regions continue to show worsening conditions.  New house sales were down 57 percent in the first quarter of this year compared to a year ago.  The parent company of Ameriquest, a large sub-prime lender, announced the immediate closing of over 200 branches and the layoff of 3,800 workers.  According to DataQuick, California notices of default were up 29 percent in the first quarter compared to a year ago and according to Realtytrac.com, U.S. foreclosures were up 63 percent in March compared to March 2005.  And prompted by plunging affordability, Statewide Bancorp of Rancho Cucamonga started to offer a 50-year mortgage loan.

At the state level, the median selling price of a home as reported by the California Association of Realtors, increased  4.8 percent to $561,350 from February's level of $535,470. This month's price is 13 percent higher than the price a year ago.  The number of sales in March is up 4.9 percent over February.  The total number of homes sold has decreased dramatically since last year, however.  Total California home sales in March are 15.1 percent fewer than last March. (www.car.org)

According to the Census Bureau, the median price of new houses fell by 6.5 percent from February to March and 2.2 percent from March 2005 to March 2006.  The pace of new house sales fell by 7.2 percent from March 2005 to March 2006.  According to the National Association of Realtors, the number of existing home sales at the national level was 0.7 percent lower than the level of March 2005 and 4.8 percent lower than the seasonally adjusted peak in June of last year.  The national median sales price for existing homes.was $218,000 in March, unchanged from the February level and 7.4 percent higher than year ago levels of $203,000.

According to the country's largest mortgage company, Freddie Mac, the nationwide average for a 30-year fixed rate mortgage as of May 4th rose to 6.59 percent with an average 0.6 points.  The 30-year fixed mortgage rate averaged 6.35 percent with 0.5 points last month.  In March of 2005, 30-year fixed rate mortgages averaged 5.75 percent.  The current rate is the highest since June 2002, when the average rate was 6.63 percent.  Frank Nothaft, Freddie Mac vice president and chief economist expects rates to continue their modest upward trend over the remainder of the year.  (freddiemac.com)

For a local perspective on the possibility of a housing bubble, visit our Special Projects page for a study of the Humboldt County housing market.

Retail Sales

The Index value for the retail sales sector is based on the seasonally adjusted dollar value of sales each month from a cross section of local retail businesses.

The retail sales sector shrank in March, falling 5.9 percent to a seasonally adjusted Index value of 136.8.  This is a 2.0 percent decrease from the same period last year.  This performance ranks the Retail Sales Index as the worst performing Index this month.  In spite of the disappointing performance, this Index is still not at a remarkably low level historically.  The Index was lower two months ago, and lower again in September and October of last year.  Prior to that there have been a number of other periods when the Index was at or below current levels.  In June of 2003, This Index was at its all time high of 153.3.

National retail sales as reported by the Federal Reserve Board’s Beige Book on April 26 were also expanding in ten of twelve districts.  Consumer spending was generally increased, but comparison to the same month a year ago was complicated by the shift of Easter from March in 2005 to April in 2006.  (federalreserve.gov)

National consumer confidence as measured by the Conference Board increased again in March, adding 2.1 points to 109.6.  A level of 100 is equivalent to the base year of 1985’s level.  The current level of this Index is the highest since May of 2002, when the Index stood at 110.3.  "Improving present-day conditions continue to boost consumers' spirits," says Lynn Franco, Director of The Conference Board Consumer Research Center. "Recent improvements in the labor market have been a major driver behind the rise in confidence in early 2006. Looking ahead, consumers are not as pessimistic as they were last month."  (conferenceboard.org)

Hospitality

The Index value of the hospitality sector is based on seasonally adjusted average occupancy each month at a cross section of local hotels, motels and inns.

The hospitality sector increased 2.0 percent in March to an Index value of 81.4.  This represents a 11.7 percent decrease from the same month last year and is still a somewhat low level historically. February and March are the two lowest months on record since December of 2004 and both are among the lowest five months since the Index data series beganin January of 1994.

Gasoline Prices

The American Automobile Association reports that county gas prices have risen 21 cents as of April 11, to $2.99, The highest prices in this area since September.  This is a sharp increase, but the state as a whole experienced more dramatic increases, bringing prices seen in other areas of the state closer to Eureka prices.  There are now many communities near the level of Eureka's prices. The average price per gallon of gas in California rose 29 cents to $2.86 and the Northern California price added 28 cents to $2.84.  International developments are largely to blame for this painful spike in prices and the worst may be yet to come.  Tensions over Iran's atomic aspirations among other issues have caused a recent bidding up of oil prices.  Sean Comey, spokesman for AAA of Northern California put it this way, "We wish we could tell you there's light at the end of the tunnel, but it's probably an oncoming train. Unless international tensions ease to the point where the cost of crude oil drops significantly, there's nothing to suggest that consumer fuel prices will be falling anytime in the near future."  (csaa.com)
                    


 For a local perspective on gasoline prices, visit our Special Projects page for our study of the Eureka gasoline market and an examination of why Humboldt County gas prices tend to be higher than the rest of California's.

Average Price* (as of 04/11/06)		Change From Prev. Month (cents/gal.)
Eureka	$2.99	21¢
Northern Ca	$2.84	28¢
California	$2.86	29¢
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

The Index value of this sector is based on seasonally adjusted kilowatt-hours of electricity consumed each month in Humboldt County. Electricity consumption is a somewhat mixed or ambiguous indicator that usually correlates with economic activity. However, increases in energy efficiency and conservation reduce the sector's index value, while not necessarily indicating a decline in economic activity. Because we collect our data for this sector quarterly, values are estimated, and are revised when the quarterly data are received.

Data for the quarter ending in December indicate very high energy consumption. The revised Index values for October, November and December are 141.8, 139.6 and 148.4 respectively.  These months represent the first second and third highest values on record for this index. Interestingly, the highest month on record prior to this quarter is September of 2001, the month of 9-11.  PG&E has been warning consumers about future increases in energy costs.  It will be interesting to note whether these levels of consumption are sustained as energy prices rise in coming months.
 

Total County Employment

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

Preliminary employment and labor force data for March indicate 60,700 people in the Humboldt County labor force, of whom  57,100 are employed.  This means that 300 individuals joined the labor force in the month.  Additionally, the Humboldt economy created 400 additional jobs during the month. The individuals who joined the labor force prevented the additional jobs from significantly reducing the number of unemployed in the County, 3,600 people.  As a result, the unemployment remained unchanged at 6 percent.  The additional jobs were in retail trade and hospitality.  The employment sector's Index value continued last month's gains, albeit at a slower rate, rising 0.3 percent to 106.1.  This level is still one percent lower than the same month a year ago.

The seasonally non-adjusted national and state unemployment rate also remained constant in March.  California's unemployment rate fell to 5.0 percent, from 5.4 percent, while the national unemployment rate fell to 4.8 percent from 5.1 percent. The rates we report each month are not seasonally adjusted, which is why rates reported for recent months in the media may differ.  (edd.ca.gov)

Lumber Manufacturing

The index value of this sector is based on a combination of payroll employment and board feet of lumber production at major county lumber companies and is adjusted to account for normal seasonal variations. Lumber-based manufacturing generates about 55 percent of total county manufacturing employment.

In March, lumber based manufacturing fell, dropping 3.0 percent to an Index value of 66.2.   This small movement leaves the index fairly stable over the last three months, holding between 65 and 70.  This range is historically quite low for the Index.  The past five months are the five lowest months on record in the history of this Index which dates back more than 12 years to January of 1994.

At the national level, the Institute for Supply Management reports that American manufacturing is quite strong.  Norbert J. Ore, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee announced that, "The manufacturing sector grew at a faster rate during April as production and employment showed significant strength."  The Report observes that although prices were up, growth in both manufacturing and in the economy as a whole accelerated.  The report was suggestive of ongoing inflation with orders, production, employment and the backlog of orders all reported as growing and customer inventories shrinking faster while supplier deliveries slowed.  The report indicated that April was the 54th consecutive month of growth in the overall economy and the 35th consecutive month of growth in manufacturing.  (www.ism.ws)

The Bigger Picture

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.

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Cited References

American Automobile Association

California Association of Realtors

California Employment Development Department

The Conference Board

Federal Reserve Board Beige Book

Freddie Mac

Institute of Supply Management

National Association of Realtors

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

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

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