Humboldt Economic Index

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 Humboldt Economic Index 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 Economic Index in December dropped fractionally. It fell by 0.8 percent, driven by declines in Manufacturing, Hospitality and Retail. Employment posted a marginal gain as several hundred workers left jobs and moved out of the labor force, although the number was seasonally smaller than usual. Home Sales posted a sharp gain as prices also appreciated. This gain was chiefly responsible for restraining the Composite Index from a sharper decline.

• Leading Indicators
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• Individual Sectors
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• Home Sales
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• Gasoline

Leading Indicators

The Index tracks four leading indicators to get a sense of the direction that the county economy may take 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) expected manufacturing orders. The graphs in this section use a four-month moving average of seasonally adjusted index values in order to demonstrate the overall trend in the data with less monthly volatility.

The seasonally adjusted Index of Unemployment Claims is represented 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.

The seasonally adjusted Unemployment Claims Index is up 18 percent. Together with last month's gain, this increase represents a 54 percent gain. During this time the labor force has contracted also, indicating that there are likely workers who lost jobs and are not seeking continued employment . These workers, known as discouraged workers, are not counted in unemployment rates and indicate larger numbers of unemployed than the unemployment numbers reflect. The recent increase in this Index may indicate softness in coming months in county employment.

The seasonally adjusted Index of Help Wanted Advertising is represented 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.

The seasonally adjusted Index of Help Wanted Advertising added 16.6 percent in December to 154.6. This is off from the highs of September and October, but it is still consistent with values throughout the rest of the year.

The seasonally adjusted Index of Building Permits is represented 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.

The seasonally adjusted Index of Building Permits Issued fell 30.2 percent to a value of 27.2. This is the lowest the Index has ever fallen. As homes have been slow to sell in recent months, building has slowed as well. The fall in permits indicates that building in coming months will also be slow. The downward trend in this Index has persisted since May when it was at a value of 78.4.

• Leading Indicators
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• Individual Sectors
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• Home Sales
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• Gasoline

Individual Sectors

Home Sales

Home Sales advanced in December to an Index value of 115.5. This represents an advance of 15.3 percent from November. Total home sales in December were well above the number in December 2005. For the entire fourth quarter of 2006, home sales totaled 309 homes, compared to 303 homes in 2005. In 2004, the total fourth quarter home sales were 396. By comparison, 2005 and 2006 were lower. This is consistent with total sales for the year which were lower in 2005 and 2006. Total sales in each of these years were 1,498 homes, 1,398 homes and 1,186 homes respectively.

During this three year period, as total sales were declining, home prices were steadily climbing. Between January 2004 and December 2006 real home prices in the county appreciated almost by half, 47.22 percent. The appreciating real home prices reached a peak in March of 2006 when the real price in 1980 dollars was $320,637, 65 percent above the price in January of 2004. Since March real home prices have declined in the county by $34,515.

According to the California Association of Realtors, the California median home price rose 2.2 percent in December to $567,690. This is 3.7 percent up from a year ago, meaning that the real increase in median home price is less than one half of one percent.

The National Association of Realtors reports that existing home sales fell 7.9 percent in 2006 while median home prices were unchanged between December 2005 and December 2006. Thus, the real price of the median home sold in the country in 2006 declined 1.7 percent.

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. Also, visit the Humboldt Real Estate Economics Page.

Retail Sales

Retail Sales declined in December by 3.6 percent to 157.7. This is still a fairly high value for this Index. In October this Index reached a remarkable high of 170.4, and it declined from this peak through the end of the year. For 2006 as a whole this Index has climbed. It's value at the end of 2005 was 137.7.

The US Census Bureau reports in its report on monthly sales for retail trade and food services that US retail activity also expanded in December and over 2006 as a whole. December retail sales gained 0.9 percent and they expanded 5.4 percent over 2006.

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

Hospitality declined 5.8 percent in December, to an Index value of 95.0. This remains within the band near 100 within which this Index frequently fluctuates. Its long term trend is fairly level and consistently near a value of 100.

Gasoline Prices

Gas prices rose within the county, as well as in the Northern California region and the state as a whole. After dramatic declines in recent months, oil prices have rebounded lately in response to concerns about colder weather in the US and the possibility of an OPEC output cut. Such a cut would decrease global supplies and drive prices higher. Part of the recent run up in oil prices is in speculation about such a cut.

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.

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.

The Electricity Consumption Index declined to a value of 118.2 as of December. This continues a slide begun in February when the Index was at a peak of 140.1. 2006 was a year of declining consumption, as 2005 ended with an Index value of 148.4. Electricity consumption is a somewhat mixed indicator of economic activity. Increased consumption is generally consistent with expanding economic activity, but decreased consumption may be a result of conservation rather than decreased economic activity. Since energy prices were high for much of the year, conservation may be a large part of the explanation for the decline in consumption during 2006.

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 December, the seasonally adjusted Humboldt County Employment Index rose slightly as the labor force contracted. 300 employed workers left the county labor force. This increased the unemployment rate from 5.3 to 5.4 percent. US seasonally adjusted unemployment remained at a fairly low 4.5 percent and California's seasonally adjusted unemployment rate rose from 4.6 to 4.8 percent.

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.

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 which attempts to demonstrate the overall trend in the data with less monthly volatility.

In December, the Manufacturing Index declined 7 percent to 62. This represents a significant decline since the summer months when the Index broke momentarily above 85. Over the course of 2006, the Index rose to a peak and fell again to end the year not far from where it began. This came after a dramatic decline in 2005 from over 100 down to the mid sixties. Since this Index reflects lumber=based manufacturing in the county, it is probable that it will continue to trend generally downward as the local timber industry continues in structural decline.

The national manufacturing sector expanded in December according to the Institute for Supply Management in its monthly Manufacturing Report on Business. It reported a PMI of 51.4. A reading above 50 indicates expansion in manufacturing activity. A reading above 42 is consistent with growth in the entire national economy, according to ISM research. 2006 as a whole was a strong year for national manufacturing with only one month without growth. Us auto manufacturers were the exception to this trend, however some foreign manufacturers, particularly Toyota, expanded their production within the US.

• Leading Indicators
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• Individual Sectors
|
• Home Sales
|
• Gasoline

Cited References:

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Copyright © 2008 Erick Eschker