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
Redwood Region Economic
Development Commission
January 2005
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.
The Humboldt County economy grew slightly in December. The
composite Index of Economic Activity rose 1.04 percent from last
month's number and now stands at 112.9 (100 = January
1994). Home sales, the revised electricity consumption
figures, and manufacturing provided upward pressure on the Index, while
the Index was pulled downward by a sharp decline in hospitality as well
as slight contractions in retail sales and employment. Consistent
with state wide trends, growth in home sales continue to increase, but
at a slower rate. This month the home sales index increased by
5.1 percent to a value of 143.1. Electricity consumption data for
the final quarter of 2004 showed continuous growth. In December
the electricity Index rose 6.6 percent to 135.9. Manufacturing
showed the strongest growth, increasing by 20.1 percent to a value of
104.5. This is the first time the manufacturing Index has
increased beyond its initial level since January of 2001. This
month's manufacturing growth is
consistent with national trends, where growth has persisted in the
manufacturing sector for several months. The hospitality sector
saw a sharp decline this month, dropping 14.9 percent to an Index value
of 77.0. The hospitality sector is based on occupancy rates at
local
hotels, motels and inns and represents a
diversity of types of
establishments, both locally owned and nationwide chains. Both
retail sales and employment sectors declined by less than one percent
this month. The Index for retail sales shrank 0.7 percent to
147.5 in December, lagging below high seasonal expectations.
National retail sales figures demonstrated a similar trend, beginning
the month below seasonal expectations, although most areas saw consumer
spending and retail sales increase by the end of the month.
Employment in Humboldt County decreased by 0.9 percent to an
index value of 102.9. After enjoying an unemployment rate lower
than the state and national averages, Humboldt County's unemployment
rate remained constant at 5.5 percent while both the state and national
averages declined in December.
|
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
|
112.9
|
1.0
|
2.9
|
10.7
|
8.2
|
6.6
|
3.0
|
Sector
|
|
|
|
|
|
|
|
|
Home Sales
|
143.1
|
5.1
|
-0.8
|
22.6 |
12.1
|
31.3
|
32.7
|
|
Retail Sales
|
147.5
|
-0.7
|
4.2
|
2.0
|
1.0
|
14.3
|
15.1
|
|
Hospitality
|
77.0
|
-14.9
|
-18.3
|
-5.4
|
-7.9
|
-14.9
|
-19.0
|
|
Electricity Consumption
|
135.9
|
6.6
|
18.6
|
53.7
|
19.9
|
15.6
|
---
|
|
Total County Employment
|
102.9
|
-0.9
|
0.3 |
1.4
|
4.9
|
1.8
|
1.8
|
|
Manufacturing
|
104.5
|
20.1
|
19.6 |
31.3
|
39.4
|
6.6
|
-7.2
|
Leading
Indicators
The
Index tracks four leading indicators to get a sense of the direction
of change in
the
county economy in the near future. The four leading indicators
are (1) number of
claims for unemployment insurance, (2) help wanted advertising, (3)
building permits, and (4)
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 increased by 22.5 percent in
December, indicating an increase in unemployment in the future.
.
Graphic description: The seasonally adjusted Index of Help Wanted
Advertising 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 help wanted advertising is an indicator of labor market
conditions and job creation. This index is based on help wanted
advertisements posted in the Times-Standard.
In December the number of help wanted advertisements decreased, while
the four month moving average continued a gradual upward trend.
This means that, despite a lower than expected month, this indicator of
future employment maintains a steady upward trend.
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 to future home sales and
construction. The Index of building permits increased 3.6 percent this month, to a value of 69.28. 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 ticked
downward slightly in December, responding to earlier decline.
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 19.57 percent in December, to stand
at 108.26. This is a continuance of the growth seen in manufacturing
orders in the past four months, as reflected in the upward slopping
moving average.
|
Key Statistics
|
Leading Indicators
|
|
|
% Change From Previous Month
|
| Median
Home Price* |
$272,000
|
Unemployment
Claims |
22.5
|
30
Yr.
Mortgage Rate as of 1/15
|
5.625%
|
Help Wanted
|
-4.0
|
| Unemployment
Rate** |
5.5%
|
Building
Permit |
3.6
|
|
|
Manufacturing
Orders
|
22.1
|
| * 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.
Home sales in Humboldt County increased in December. The home
sales index value rose 5.1 percent and now stands at 143.06. The
median home grew to $272,000,
higher than last month's median price but below September's record
setting price. This indicates a leveling off of the housing
market, following several months of remarkable growth.
Statewide
home prices as well as sales increased when compared
to the same period last year.
The median home
price in California is $474,480, up 0.5 percent from the previous
month, and up 18.1 percent from December 2004. “After peaking in
the middle of 2004, the number of homes for sale dropped again last
month to a 2.8 month supply compared with 3.5 months in November,” said
C.A.R. Vice President and Chief Economist Leslie Appleton-Young.
“Despite having fewer homes to choose from, buyers are becoming more
selective and are taking more time before making an offer on a home.
The median number of days it took to sell a single-family home reached
43 days in December, compared to 27 days a year ago.” C.A.R.
President Jim Hamilton cited a fear of future mortgage-rate increases
as the cause of December's strong numbers.
(www.car.org)
Nationally,
December exhibited a slowing of the pace that set 2004 far ahead of
2003's numbers. David Lereah, NAR's chief economist, said a
decline was expected for December. "Our sense was that November sales
were the peak for the current housing cycle, but activity remains
strong," he said. "There is no sign of a downturn. Home sales will
continue at historically high levels, and 2005 is expected to be the
second-best year on record for the housing market." (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 January 27th, was 5.66
percent with an average 0.6 points. This is down slightly from
last month. With the end of the year behind us, housing markets
should remain calm while future policy is decided, based on last year's
performance. "Until the market gets a better read of how the
economy performed at the end of last year and how the Fed interprets
that information, interest rates will likely remain calm," said Frank
Nothaft, Freddie Mac vice president and chief economist. "And it should
get that read when fourth quarter Gross Domestic Product (GDP) is
released tomorrow.”
(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.
The retail sector declined slightly in December, dropping 0.7 percent
to an index value of 147.5. December is traditionally a very
strong month for retail sales due to the holiday season, and this
month's contraction shows that Humboldt County sales did not meet
seasonal expectations.
Conversely, the Index value for retail sales has increased 4.2 percent
from December 2003.
Nationwide retail sales, as reported by
The
Commerce Department, increased in December.
Seasonally adjusted
sales were $349.4 billion, an increase of 1.2 percent (±0.8%)
from the previous month and up 8.7 percent (±1.0%) from December
2003. Total sales for the entire year of 2004 were up 8.0 percent
(±0.2%) from 2003. (census.gov)
According
to The Federal Reserve Board consumer spending across the nation was
generally higher than previous months, though many of the surveyed
financial districts reported slow sales early in December.
California specifically reported sluggish retail sales early in
December, increasing toward the end of the month. The highest
selling products nation wide included electronics, jewelry, and gift
cards during the holiday season.
(federalreserve.gov)
Looking to the future, consumer
confidence increased in the month of January. "Despite the slight
retreat in expectations, consumers' short-term outlook remains
favorable and suggests the economy will continue to expand throughout
the first half of this year," says Lynn Franco, Director of The
Conference Board's Consumer Research Center. "And, recent advances in
the Present Situation Index, now at its highest level since May 2002,
suggest consumers will not dramatically alter their spending in the
months ahead." The Conference Board's Consumer Confidence Index,
which had improved in December, edged up in January. The Index now
stands at 103.4 (1985=100), up from 102.7 in December.
(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.
Graphic
description: The seasonally adjusted hospitality index is represented
by the blue area in the graph above.
The red line shows the four-month moving average of the hospitality
index which smoothes month-to-month volatility to show
the long run trend.
Local
inns, hotels and motels reported lower than usual occupancy rates,
leading to the
hospitality index's second consecutive month of decline.
After dropping 14.9 percent from last month, the index for this sector
now stands at 77.0. This most recent figure is down compared to
the same month in previous years. This index value is down 18.3
percent from December 2003's value as well. Please note that the
index numbers are seasonally
adjusted and relate back to the base month 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. The four
month moving average, indicated by the red trend line, shows that
while the hospitality sector fluctuates beyond seasonal
variability, the overall trend is one of consistency.
Nationally,
The Federal Reserve Board reported strong tourism activity in several
districts, including high occupancy, increased tickets sales, and
higher than expected visitors at ski resorts.
(federalreserve.gov)
Gasoline
Prices
Gas prices continued to drop for the
third consecutive month statewide. According to the California
State Automotive Association, the recent decline in fuel prices is due
in large part to an increasing stockpile of oil in the past few
months. A mild winter has reduced demand for heating oil,
allowing reserves to build up. There was some concern that the
oil producing cartel OPEC’s January 30, 2005 meeting would lead to
increased oil prices. OPEC’s decision to maintain current
production levels should in not affect current gas prices. (www.csaa.com)
Average Price*
(as of 1/18 )
|
Change From Prev. Month
(cents/gal.)
|
| Eureka |
$2.06
|
-11¢
|
| Northern CA |
$1.90
|
-25¢
|
| California |
$1.94
|
-22¢
|
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). |
For more information on local gasoline prices, visit our
Special
Projects page for Dr. Eschker's Study of the Eureka Gasoline
Market.
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.
Electricity consumption for Humboldt County increased 6.6 percent in
December to 135.92.
Revised electricity index figures for the fourth quarter are as
follows:
- October's
electricity Index value was revised to 122.79.
- November's
electricity Index value was revised to 127.53.
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 December,
the
EDD reported 57,400 people were employed in Humboldt
County. This
number is down from November's revised figure, indicating a net loss of
600
jobs.
The total civilian
labor force decreased by 700 people to 60,700. The seasonally adjusted
total
county employment index fell 0.9 percent, and now stands
at 102.9.
Sectoral
changes in Humboldt County employment:
- Overall the service sector posted a net
loss of 300 jobs in December.
- Transportation, Warehousing and Utilities
lost 100 jobs.
- Miscellaneous Retail gained 100 jobs.
- Food Services and Drinking Places lost
100 jobs.
- Local Government lost 100 jobs.
- Education and Health Services lost 100
jobs.
- Overall goods producing employment posted
a net loss of 100 jobs in December
- Construction lost 100 jobs.
The county
unemployment rate stayed constant at 5.5 percent in December.
Both the State and National unemployment rates have now dipped below
county level. The unemployment rate stayed constant despite an
increase in the size of the labor force and net job loss in both the
goods producing and service providing sectors.
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.
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.
In
December the lumber-manufacturing index increased 20.1 percent from
last
month's revised figure and now stands
at 104.5.
This is the first time the manufacturing Index has risen above the 100
level since 2001. At this point it is unclear if the sudden
increase is indicative of sectoral growth, or an irregular fluctuation
in the industry.
National economic activity in the
manufacturing
sector, as measured by the Institute of
Supply
Management, grew for the 20th consecutive month in December. The
PMI registered 56.4 percent as of the February 1st report; a number
over 50 indicates growth. "January sets the tone for a strong
first
quarter. Even though the PMI is slightly lower, the month-over-month
growth is still quite strong and will provide significant momentum for
the remainder of Q1. Demand for exports continues to be quite strong,
with a number of industries reporting significant growth. Inventories
have now increased during seven of the last eight months, but still do
not appear to be a problem as manufacturers' customers' inventories
appear to still be too low," said Norbert J. Ore, C.P.M.,
chair of the Institute for Supply Management. (www.ism.ws.cfm)
The
Bigger Picture
National Economic
News
By: Andrea Walters
Social Security took center stage in President Bush’s State of the
Union address. The next day, Bush took Social Security reform on
the road, visiting five states on Thursday and Friday. Bush’s
plan is to allow workers to shift 4 percent of their payroll-tax
contribution to private accounts. The white house estimates this
partial privatization will cost $754 billion in additional government
borrowing by 2015, and trillions more in subsequent decades.
Critics of Bush’s reform aspirations ask where the money will come
from, given the historically high levels of personal and government
debt. (economist.com)
Other options for reforming Social Security include indexing Social
Security benefits to prices rather than wages, increasing the
retirement age, and changing the way benefits are calculated.
Above all, Bush has promised that people at or near retirement will not
see a change in benefits under his proposal. Subsequently the
full burden of fixing Social Security falls on the shoulders of current
and future generations. This is surprising considering current
retirees received the greatest payout from the system. So far,
Bush’s Social Security reform has received little support from
Congress. (sfgate.com)
Social Security, created in 1935, is one of the largest and most
popular domestic spending programs. A ‘pay-as-you-go’ system,
current workers’ payroll taxes fund the social security payments made
to current retirees and other recipients. While the baby boomers
made up the workforce, Social Security ran a surplus, taking in more
money in taxes than it was paying. With the baby boomers
preparing to retire and current retirees living longer, the retirement
population will soon over burden the current working population.
According to President Bush the Social Security system is expected to
begin paying out more than it takes in 2018, but will be able to pay
all currently promised benefits until 2042. (nytimes.com)
The Federal Reserve met last Tuesday and agreed unanimously to increase
the interest rate by a quarter of a
percentage point. In a statement similar to those issued
following the Fed’s November and December meetings, national economic
growth was described as moderate. Further, the job market was
described as improving “gradually” and inflation as “well
contained”. The Fed plans to continue raising interest rates at a
measured pace in an effort to balance the risks to economic growth and
price stability. (wsj.com)
By raising the interest rate, the cost of borrowing money and the
benefits of saving money increase. Raising the interest rate
slows the economy down by making it more expensive for firms to borrow
funds to increase production. Higher interest rates also make it
more profitable for individuals to save rather than spend, which
decreases consumption and retail sales. Slowing the economy down
in such a way can inhibit economic growth, or can act as a leash on
inflationary effects, slowing down an increase in prices.
| 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 Wall Street Journal web
site
The San Francisco Chronicle web site
The New York Times web site
The Economist 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
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