INDEX OF ECONOMIC ACTIVITY
FOR
HUMBOLDT COUNTY
Professor
Erick Eschker, Director
Andrea Walters, Assistant Editor
Laura Lampley, Assistant Analyst
This month's
report
is sponsored by
Coast Central Credit Union
December 2004
Graphic description: The seasonally adjusted composite Index
is represented in the graph above by the blue area. The red
trendline shows the four-month moving average of the Index
which smoothes month-to-month volatility to show the long run trend.
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.
Humboldt County's economy continued steady but mild growth in November.
The composite Index of Economic Activity rose 0.7 percent
to 110.3. November's growth was fueled by strong index values in
the retail and manufacturing sectors, and balanced by contractions in
the
hospitality and home sales sectors. The home sales index declined
for the first time in months, due to a decline in the number of
homes sold. November's median selling price fell to $269,500
while the average selling price rose to $308,272. The home
sales index, though down from last month, are still higher than the index value one year ago. The retail
sector grew by 7.0 percent from last month, surpassing seasonal
expectations, to an Index value of 148.7. The
hospitality sector declined by 8.8 percent to an index value of 90.54. This month saw
a rise in the county unemployment rate to 5.3 percent, which is still
lower than the state average. The Employment index for the county
increased by 1.1 percent to a value of 103.9.
This gain in the employment index is due in part to an increase in the
number of jobs provided in both the retail and manufacturing
sectors. Manufacturing grew
again this month, rising by 6.6 percent to an index value of
86.99. This growth is consistent with growth in manufacturing
across the nation. Electricity
consumption remains unchanged at an estimated 113.49.
|
Composite & Sectoral Performance,
Index
of
Economic Activity for Humboldt County
|
|
* * *
|
Percent Change From:
|
Index
|
Seasonally Adjusted Index Value (1994=100) |
Previous Month |
Same Month 2003 |
Same Month 2002 |
Same Month 2001 |
Same Month 2000
|
Same Month 1999 |
COMPOSITE
|
110.1
|
0.7
|
2.6
|
2.4
|
6.8
|
-1.1
|
-1.3 |
Sector
|
|
|
|
|
|
|
|
|
Home Sales
|
136.09
|
-5.6
|
4.8
|
-3.7
|
25.2
|
11.2
|
12.1
|
|
Retail Sales
|
148.7
|
7.0
|
5.5 |
10.3
|
22.5
|
6.2
|
12.9
|
|
Hospitality
|
90.54
|
-8.8 |
-1.3
|
0.7
|
-6.1
|
-5.1
|
-4.3
|
|
Electricity Consumption
|
113.6
|
0.0
|
1.0
|
0.3
|
4.6
|
-7.5
|
-
|
|
Total County Employment
|
103.9
|
1.1
|
0.3
|
0.0
|
2.9
|
-0.6
|
0.0
|
|
Manufacturing
|
86.99
|
6.6
|
11.1 |
7.5
|
0.2
|
-12.0
|
-20.3
|
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
claims for unemployment insurance, (2) building permits, and (3)
manufacturing orders. 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.
Graphic description: The seasonally adjusted Index of Claims for
Unemployment Insurance is represented above by the blue area. The
red trendline shows a four month moving average which "smoothes" month
to month volatility.
The index of claims for unemployment insurance is an indicator of
negative economic activity. This leading indicator decreased by
3.8 percent in November, dragging the four month moving average
down. Even though the actual number of unemployment claims rose
this month, the data did not match what is usually a season of high
unemployment. An decrease in the number of claims for
seasonally adjusted unemployment insurance may indicate improving labor market conditions
in the future.
Graphic description: The seasonally adjusted Index of Building Permits
is represented above by the blue area. The red trendline shows
the four month moving average which "smoothes" month to month
volatility.
The index of building
permits issued gives insight into future home sales and
construction. The Index of Building Permits increased this
month. Since this
measure experiences a great amount of month to month variability, the
four month moving average is used to determine longer term
trends. As depicted in the graph above, the moving average
leveled off in November.
Graphic description: The seasonally
adjusted Index of Manufacturing Orders
is represented above by the blue area. The red trendline shows
the four month moving average which "smoothes" month to month
volatility.
The index of
manufacturing orders shows expectations for future manufacturing
sales. This index increased 1.6 percent in November, to stand at
88.69. The moving average for this indicator shows a strong upward trend since the summer.
|
Key Statistics
|
Leading Indicators
|
|
|
% Change From Previous Month
|
| Median
Home Price* |
$269,500
|
Manufacturing
Orders
|
1.5%
|
30 Yr.
Mortgage Rate as of 12/6
|
5.750%
|
Building
Permits |
4.6%
|
| Unemployment
Rate** |
5.3%
|
Unemployment
Claims |
-3.7%
|
| * 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.
November saw a decline in home sales in Humboldt County. The home
sales index is down 5.7 percent and now stands at 136.09. The
local median home price is down further this month from September's
record high, though still twenty-one percent higher than the median home
price one year ago. A median priced home in Humboldt County now
costs $269,500. Increased purchasing power from low interest
rates as well as investor's weariness about the stock market are
contributing to the recent price increases.
Statewide median home prices exhibited growth from November 2003 and
home sales increased by 4 percent. The median home price in
California is now $473,260, up 2.9 percent from the revised October
median, and up 23.1 percent from November 2003. "While the
inventory of homes for sale has increased to more than a three-months’
supply, consumer demand and the low mortgage interest rate environment
are still driving the market," said Leslie Appleton-Young, C.A.R.'s
vice president and chief economist. "Time on the market has trended up
to 40 days, an indication that buyers are taking more time prior to
making the purchase decision compared with the frenzied pace we
witnessed most of this year." (www.car.org)
Nationwide, this month set the highest monthly sales pace on record for
November. David Lereah, NAR's chief economist, said low interest
rates get much of the credit. "Mortgage interest rates dropped a
quarter of a percentage point in late summer and then stabilized," he
said. "Coupled with a growing labor market and a rising economy, this
created optimal conditions for the housing sector."
(www.realtor.org)
According to the country's largest mortgage company, Freddie Mac, the
nationwide average for a 30-year fixed rate mortgage as of December
29th, was 5.81 percent with an average 0.6 points. Amy Crews
Cutts, Freddie Mac deputy chief economist said, “Although
mortgage
rates are expected to rise in 2005, it will not be to a big enough
degree to take much of the steam out of the housing industry. Next year
sales may drop off slightly from this year’s banner pace, but the
industry will continue to be healthy and robust well into the future."
(www.freddiemac.com)
Retail Sales
The
index value of the retail sales sector is based on the seasonally
adjusted dollar value of
sales each month from a cross section of local retail businesses.
Humboldt County's retail sector experienced a slight drop in
November. The retail sales index, which now stands at 138.9, is
down 3.0 percent from the previous month. “The continuing
economic expansion, combined with job growth, has consumers ending the
year on a high note,” says Lynn Franco, Director of The Conference
Board’s Consumer Research Center. “The most significant contributor to
the rebound in confidence has been the overall improvement in current
conditions over the past twelve months. And consumers’ outlook suggests
that the economy will continue to expand in the first half of the new
year.” US households are expected to spend more
this holiday season than last year.
(www.conference-board.org)
Nationally, retail sales figures varied among Federal Reserve
Districts. Overall consumer spending was uneven since October,
with few increases in the retail sales and many sectors of the nation
noting mixed, flat or slower sales. Automobile sales were flat to down
across most Districts, and several Districts reported higher dealer
inventories than desired. Energy-related activities remained
strong.
(www.federalreserve.gov)
The Conference Board’s Consumer
Confidence Index, which had been on the decline since August, rebounded
in December. The Index now stands at 102.3 (1985=100), up from 92.6 in
November. The Expectations Index rose to 99.9 from 90.2. The Present
Situation Index increased to 105.9 from 96.3 (www.conference-board.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 index fell 8.8 percent in November to an index value of
90.54. The index numbers are seasonally adjusted and relate back
to the base month of January 1994. This seasonally adjusted index is
different from raw occupancy rates, as the expected seasonal variation
is removed so that changes over time can be compared more
appropriately. This month's low index value indicates lower than expected occupancy rates for the winter.
Gasoline
Prices
Gas Prices dropped dramatically
throughout California in December. Eureka, though still slightly higher
than state averages, showed the most dramatic decline, falling to $2.17
per gallon. "We’re seeing some gas stations where gas now sells
for less than $2 a gallon," said Sean Comey, spokesman for AAA of
Northern California. "In most communities, the average cost of fuel is
still higher than that, but at least we’ve seen prices falling steadily
for more than a month." The drop in the retail price of gasoline
is largely due to the drop in the price of crude oil. However,
the reduced crude oil prices are not expected to endure as the members
of OPEC (Organization of Petroleum Exporting Countries) voted recently
to reduce production and subsequently raise prices. (www.csaa.com)
Average Price*
(as of 12/16 )
|
Change From Prev. Month
(cents/gal.)
|
| Eureka |
$2.17
|
-25¢
|
| Northern CA |
$2.15
|
-21¢
|
| California |
$2.16
|
-20¢
|
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 kilowatts-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. Because we
collect our data for this sector quarterly, values are estimated, and
are revised when the quarterly data are received.
The estimated electricity consumption index for November is 113.49,
unchanged from last month's figure.
Total
County
Employment
The index value of the employment sector
is based on seasonally adjusted total employment as reported by the
Employment Development Department.
EDD reported 58,700 people were employed
in Humboldt County in their preliminary figures for November.
This figure demonstrates growth of 400 jobs from October’s revised
figure. The total civilian labor force also increased by 500
people, to total 61,900. The seasonally adjusted total county
employment index rose 1.1 percent, and now stands at 103.9.
Sectoral
changes in Humboldt County employment:
- Overall the service sector posted a net
gain of 400 jobs in November.
- Food and Beverage Stores lost 100 jobs.
- Education and Health Services gained 100
jobs.
- Retail Trade gained 200 jobs.
- Trade, Transportation and Utilities
gained 200 jobs.
- Overall goods production employment was
unchanged in October.
- Wood Product Manufacturing gained 100
jobs.
- Natural Resources and Mining lost 100
jobs.
The Humboldt County
unemployment rate increased 3 percent in November. The measure,
which now stands at 5.3 percent, is still lower than the state average,
while the national average dipped to a slightly lower 5.2
percent. The increase in the Unemployment rate is due in part to
the increase in the size of the labor force, which grew by more than
the number of employed people.
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 60 percent of total county
manufacturing employment.
In November the lumber-based manufacturing index increased 6.6 percent
from last month's revised figure and now stands at 86.99.
Although this is the third consecutive month of growth in the
lumber-based manufacturing index, the index for this sector has not
reached above the 100 level since January 2001.
Graphic
description: The seasonally adjusted lumber-based
manufacturing index is represented by the blue area in the graph above.
The red line shows the four-month moving average of the lumber-based
manufacturing index which smoothes month-to-month volatility to show
the long run trend.
At the national level, the manufacturing
sector continued to show economic growth for the eighteenth consecutive
month. The PMI registered 57.8 percent most recently, indicating
continued growth. "November reverses three consecutive months in which
the rate of growth had slowed. The manufacturing sector appears poised
to end the year on a strong note as the New Orders Index made its way
back above the 60 percent mark, and the Employment Index picked up
significant momentum. There is still significant upward pressure on
prices as commodity price increases are common,"
said Norbert J. Ore, C.P.M.,
chair of the Institute for Supply Management. (www.ism.ws.cfm)
National
Spotlight
Andrea Walters
January 4, 2005
On December
30, 2004, the US dollar hit a record low in value against
the Euro. Economists across the nation and around the world have
watched the value of the dollar slip from its former strength, despite
increases in American interest rates. Early in 2004, one Euro
cost $1.25; the exchange rate now stands at $1.37 to one Euro.
The dollar has
also fallen against other European currencies, and is
nearly half the value of one British Pound. According to The
Economist Global Agenda (www.economist.com), the dollar’s decline is
due to private investors reluctance to finance America’s huge
current-account deficit. The American practice of importing more
goods than we export further contributes to our current-account deficit
by creating a trade deficit. A weak dollar exacerbates our
trade deficit.
The deficit
widened slightly in the third quarter of 2004, to a record
$165 billion, or 5.6% of GDP.
As domestic
interest rates rise, refinancing our National debt will
become more and more costly. Without an increase in public and
private savings, the net payments required for our foreign debt will
reach 4 percent of GDP by 2020. The economic benefit of a weak
U.S. dollar is the increased purchasing power other nations gain.
Our weakened currency means foreign currencies are more valuable,
making out export goods comparatively cheaper. The increase in
demand for American goods will pressure American producers to increase
production.
Another side
effect of a weak dollar is increased foreign
tourism. The Travel Industry Association of America (www.tia.org)
reported the first increase in inbound travel since September 11,
2004. Currently, Ski Resorts and other winter holiday
destinations are seeing the biggest change, but European travel agents
report an increase in bookings to the United States up to 18 months in
advance. Whether or not Humboldt County will see a tourism boost
as a result remains to be seen
.
| 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 North Coast Journal
web site
The New York Times web site
The Economist
California Association of Realtors web
site
National Association of Realtors
web site
Employment Development
Department
web site
Freddie Mac web site
American Automobile Association web
site
Travel Industry Association of America
The Conference Board web
site
Institute of Supply Management web 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
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