INDEX OF ECONOMIC ACTIVITY FOR HUMBOLDT COUNTY
Professor Erick Eschker, Executive Director
Ceema Feizollahi, Managing Director
The seasonally adjusted composite index value for June is a preliminary
109.2.
This is 3.8 percentage points higher
than May's upwardly revised 105.4.
In June 2002, the composite index
value was also 107.1.
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| Median Home Price* |
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Help Wanted Advertising |
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Mortgage Rate |
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Building Permits |
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| Average Hotel Occupancy Rate |
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Unemployment Claims |
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| Unemployment Rate** |
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Manufacturing Orders |
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| * 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. | |||
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95.7 |
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| Due to
techinical difficulties the employment estimate will not run this
month. Please continue to look for this feature in future issues. |
Four of the Index's six seasonally adjusted sectors registered positive growth relative to May's revised numbers, moving the overall composite index upward to a preliminary 109.2. Of these, retail sales, one of the Index's most consistently strong sectors, registered strong growth and the largest increase in month-over-month activity. Lumber-based manufacturing increased slightly this month from the previous month's unchanged figure, yet the same month of activity for the past five years remains in the red. The total county employment rose slightly for the first time in three months, discouraged worker effect. The hospitality sector bumped upward as the summer got under way for seasonal travelers, however, over the past five years, June's activity has been sluggish. Home sales lost the most ground again this month, yet continues to be a hot topic this summer.
The seasonally adjusted leading
indicators are mostly positive this month, with three of the four
indicators looking optimistic. New claims for unemployment insurance
in June fell again this month by 11.8 percent from May's number. On a four-month moving average basis,
which is an average of the indicator over the past four months, the
seasonally adjusted unemployment claims is still trending negatively
since February of this year. Help-wanted
advertising for July decreased 5.3 percent from its June level, as
seasonal employment opportunities are fewer than anticipated. Still, the
four-month moving average for help-wanted advertising is rising. Last month's slight improvement for Manufacturing orders didn't last long as it is down 2.0
percent this month, yet it maintains enough momentum to keep the
four-month moving average up for the second time since last December. Building permits took a strong lead this month, enough to
take the downward four-month moving average trend since December and
shift it upwards. Although building permits tend to be volatile,
and it cannot be clearly determined the direction this leading indicator
will take. The Humboldt County Employment Estimate
estimates the number of jobs to be added in the job market for the next
month. However, this feature is not available this month due to
technical difficulties.
Seasonally adjusted home sales fell
again this month by more than 10 points from May's index level, which is
a decrease of 8.2 percent. Although the number of homes sold in Humboldt
County dropped this month, the state and national pace and price of
homes continue to exceed realtor's expectations.
June's
median home price took a substantial fall from May's record figure of
$213,500, dropping 7.9 percent
to $196,500. The
current statewide median sale price for existing homes rose once again
in June, nudging upward 1.8
percent to $376,260 from May's upwardly revised number. The current
figure is 15.9 percent higher
than in June 2002, when it was $324,640.
June's national median price for existing homes remained unchanged from May's level of $176,500, and is still 7.7 percent higher than it was in June 2002 (www.realtor.org). The similar figure for new homes fell 4.2 percent from May's unchanged $195,200 to $187,000. This measure is down 1.6 percent when compared to June 2002 (www.census.gov).
The most recent release of the Humboldt Association of Realtors' Housing Affordability Index, which represents the percentage of Humboldt County households that could afford to purchase a median priced home in May, dropped five percentage points from the previous month's 33 percent. The Housing Affordability Index now stands at 28 percent, which is a decline of 12 percentage points from in May 2002. This level is lower than in any month over the last four years. The next graph shows the five-year tend:
The California Association of Realtors
(C.A.R.) special report for June focuses on the housing affordability
crisis in California. Many organizations and realtors are looking
at ways to solve the challenge. "From sponsoring bills in the
Legislature and providing initial funding for C.A.R.'s new Housing
Affordability Fund to creating a Housing Affordability Task Force to
coordinate all of C.A.R.'s efforts, I remain upbeat about our industry's
ability to meet this challenge," said C.A.R. President Toby Bradley.
So who might be driving up the demand for
these home sales? National Association of Realtors President Cathy
Whatley suggests that low interest rates coincides with strong housing
demand by younger households, immigrants, and minorities.
"Echo boomers-the children of the baby boom generation - are entering
the age for buying a first home. If fact, four out of 10 buyers
are purchasing their first home, which is providing liquidity to sellers
and is supporting strong price appreciation."
According to the country's largest mortgage company, Freddie Mac, the nationwide average for a 30-year fixed rate mortgage as of July 31rst, was 6.14 percent with an average 0.5 points. Last year at this time, the average rate was 6.43 percent with an average 0.6 points (www.freddiemac.com).
The Commerce Department reports that national May retail sales was up 0.5 percent from the previous month's level, and up 4.2 percent from June 2002. The increase was led by strong activity at gasoline stations (up 5.8 percent), retail trade sales (up 4.1 percent), and building material and garden equipment and supply dealers (up 6.1 percent) when compared to June 2002. (www.census.gov).
The Conference Board's Consumer Confidence Index, which remained steady in June, declined in July. The measure, which now stands at 76.6, fell 6.9 points from the previous month. “The rising level of unemployment and sentiment that a turnaround in labor market conditions is not around the corner have contributed to deflating consumers’ spirits this month,” says Lynn Franco, Director of The Conference Board’s Consumer Research Center. “Expectations are likely to remain weak until the job market becomes more favorable.” (www.conference-board.org).
Average occupancy at the participating hotels, motels and inns increased 10 percent in June from the previous month's level as summer began. The index number for the sector increased 6.5 percent to stand at 95.7, however, the same month of activity for the past five years has been in decline.
According to Sam Zuckerman, a Chronicle Economist writer, revenue at Bay area hotels plummeted 40 t0 50 percent between 2000 and 2003. Although, he describes increase in occupancy rates due to falling room rates as more travelers use the Internet for hotel discounts. Otherwise, Chip Conley, chief executive of Joie de Vivre Hospitality, a chain of 25 boutique hotels, describes this period as "The worst ever in the history of the American hotel market," as well as having "a lot of ground to make up."
Gasoline Prices:
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(as of 7/15) |
(cents/gal.) |
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| Eureka |
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| Northern CA |
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| California |
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| 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). |
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According to a AAA press release, Jenny
Mack, a AAA Northern California spokeswoman, said "Prices started
heating up in early June, when several refineries experienced production
problems, while prices remain higher than they were a month ago, they
do appear to have stabilized over the past couple of weeks."
With that, AAA also estimated that 4th of
July travel would be the highest in 9 years. An estimated 5.4
million Californians, one of every six people, would travel 50 miles or
more that weekend. Cynthia Harris, another spokeswoman for AAA of
Northern California, says "A lot of people say they don't just want a
vacation, they need one. Californians seem to have an increased
interest in leisure travel and many are taking advantage of the holiday
weekend to take a well deserved break from the stress of their everyday
routine."
With the actual second quarter consumption data released, our previous seasonally adjusted estimations, which were based on prior years' consumption, have been revised upwards:
June's consumption of electricity fell 7.2 percent to 107.6 from May's revised level.
An update on the natural gas situation
has been released from the Pacific Gas & Electric company explaining
the recent events they have encountered and what they have done to
improve the situation. It first describes that winter heating
demand combined with demand from natural gas-fired thermal electric
generators drove up usage and price of natural gas. It also
explains that as the company's financial situation was in jeopardy in
January 2003, natural gas suppliers stopped, or threatened to
stop the delivery of natural gas. The company also described a
situation that could take place if suppliers do not supply enough
natural gas, stating that "then suspension of gas service to all
customers in certain regions may become necessary, in order to maintain
supplies for other regions."
Although PG & E is working hard to
counteract a potentially complicated situation, fearing another problem
much like that of the electricity crisis. They looked for and were
granted approval from the California Public Utilities Commission (CPUC),
to offer gas suppliers a security interest in future gas customer
accounts receivable. Although 11 companies out of 25-30 have
already signed on with PG & E, they are still apprehensive that they
could stop supply at any time.
In their preliminary report for June, the EDD reported that 57,000 people were employed in Humboldt County. This is a 1.0 percent increase over May's revised figure, indicating a net gain of 600 jobs. As a result, the seasonally adjusted index number rose 0.9 percent.
Preliminary EDD data indicate the following changes in Humboldt county employment:
June's unemployment rate for Humboldt
County dropped a full three-tenths of a point from May's upwardly
revised 6.4 percent to a preliminary 6.1 percent. Meanwhile, the
national rate (not seasonally adjusted) climbed seven-tenths of a point
to a preliminary 6.5 percent, and the state rate moved upwards
three-tenths of a percentage point to 6.7 percent from June's upwardly
revised figure.
In an article "No Help Wanted for Help-wanted" by Daniel Gross, the Conference Board's Help-Wanted Index, much like our local Help-Wanted Index which measures the volume of help-wanted classified advertisements in newspapers, stood at 36 in May. This is it's lowest level since 1961 and down 50 percent from February 2001. Unemployment and job vacancies have an inverse relationship known as the Beveridge curve, named after a British economist. The curve predicts that periods of low-volume advertising would coincide with high unemployment, as would high-volume advertising would correspond to low unemployment. In recent history the Help-wanted Index has proven itself reliable plummeting in 2001 when more than 2 million jobs were lost and unemployment rose (www.msn.com).
The preliminary June Index value for this
sector rose 14.4 percent from May's unchanged number to
85.3. This is the largest month-to-month increase recorded
with the Index.
Contraction in nationwide manufacturing employment continued in June as overall employment in this sector has shrunk for a staggering 35 consecutive months, although Norbert J. Ore, C.P.M., chair of the Institute for Supply Management states that "While the overall economy appears to be in a recovery, the manufacturing sector failed to grow in June. However, the improved showing of the New Orders, Production, and New Export Orders Indexes is encouraging as it appears that manufacturing is positioned for a recovery in the second half." (www.ism.ws.cfm).
Employment-Based Economic Indicators:
A count of help-wanted ads indicates the number of new job openings.
Claims for unemployment insurance indicate the number of newly unemployed people in Humboldt County. Thus the number of new unemployment claims is a negative indicator of economic activity.
Manufacturing Economic Indicator:
Manufacturing orders are a leading indicator of activity and employment in the County.
Home Sales Economic Indicator:
Building permits:
Big budget news this month, or rather a small budget, as the State of California now has a budget for the 2003-2004 fiscal year. After an Assembly session of more than 29 straight hours, and 33 days later than expected, California state Governor Gray Davis signed the $99 billion spending plan on Saturday, August 2, 2003. The budget, that depends mostly on loans, fund shifts and deferrals, would still leave a multi-billion dollar deficit again next year. A few sectors of California that are expected to get hit the hardest would be a $1.1 billion reduction in state workers, $433 million for the University of California and California State University systems, and $825 million in local governments. At the risk of not having a budget for this fiscal year, Davis said, "This is wrong and this is bad policy, but I'm going to sign this budget nonetheless, because the cost of not signing it is too high." (www.sfgate.com).
The most recent release of the Federal Reserve Board's Beige Book, which reports on economic activity for late June and July, reported that the national economy exhibited signs of modest but sluggish growth. Housing sales remained strong again across all districts, influenced by low mortgage rates even though commercial real estate sales remained slow. Manufacturing activity increased slightly, and activity in service and energy sectors grew faster in the past few weeks. The agriculture sector suffered tough weather conditions as excessive rainfall delayed harvesting and damaged some crops even though in some districts it alleviated droughts (www.federalreserve.gov).
The gross domestic product (GDP), which
measures the total value of the nation's output of goods and services,
grew at an annual rate of 2.4 percent during the second quarter.
This was 0.8 percent higher than economists had predicted. The
accelerated pace was led by federal government, business, and consumer
spending. The increase in defense spending, which grew to a 44
percent annual rate, was the fastest quarterly pace of defense spending
since the Korean War of more than 50 years ago. The GDP is
expected to increase to 3.5 percent in the fourth quarter and up to 4
percent next year. According to Treasury Secretary John Snow, "We
haven't yet seen the full effects of the tax bill -- add the momentum
that's already there and I think we're going to have some much better
results to report in the third and fourth quarter."
| 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 green 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 (the blue line in the diagram above) provide a better indication of underlying growth and fundamental change in the economy. This month's report reflects data gathered from the previous month, and so the "July 2003" report reflects data from June 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
California Association of Realtors web site
National Association of Realtors web site
American Automobile Association 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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