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
Six Rivers Bank
Jump to: Composite | Leading Indicators | Individual Sectors | The Bigger Picture
March 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 contracted in February. The
composite Index dropped 3.22 percent from last
month's number and now stands at 111.3 (100 = January
1994). Moderate growth in the employment and hospitality
sectors pushed the Index up, while a sharp drop in the number of
homes sold combined with declines in the retail and manufacturing
sectors to pull the Index down. This follows the particularly
strong economic conditions reported in January, when the Index reached
the near-record value of 115.0. The
employment sector grew 2.0 percent to a value of 106.6, pushed by a
surge in state and local government jobs. The unemployment rate
for
Humboldt County also fell slightly to 6.9 percent despite an increase
in the labor force. The hospitality sector also saw growth,
though less substantial than January's. The hospitality Index
rose 2.3 percent to a value of 89.7. 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.
February's Hospitality Index value represents slight growth from
February of 2004. While the median
home price reached an all time high this month, the number of homes
sold dropped significantly, bringing home sales down
20.2 percent to an Index value of 109.16. Manufacturing also saw
steep decline,
dropping 10.9 percent to an Index value of 92.7. This still
represents growth from the same period last year. Retail sales
also contracted this moth, decreasing 6.8 percent to a value of
138.9. This contraction could be a reflection of the U.S.
Conference Board's reported decrease in consumer
confidence. Electricity consumption, estimated at 144.2,
had no bearing on the composite Index this month.
|
Composite & Sectoral Performance,
Index
of
Economic Activity for Humboldt County
|
|
* * *
|
Percent Change From:
|
Index
|
Seasonally Adjusted Index Value (1994=100) |
Previous Month |
Same Month 2004 |
Same Month 2003 |
Same Month 2002 |
Same Month 2001
|
Same Month 2000
|
COMPOSITE
|
111.3
|
-3.22
|
5.6
|
2.8
|
4.9
|
1.9
|
-0.9
|
Sector
|
|
|
|
|
|
|
|
|
Home Sales
|
109.16
|
-20.2
|
-5.8
|
-25.6
|
-11.4
|
-16.4
|
-19.1
|
|
Retail Sales
|
138.9
|
-6.8
|
7.0
|
-1.2
|
3.9
|
0.1
|
-2.7
|
|
Hospitality
|
89.7
|
2.3
|
1.4
|
11.5
|
0.5
|
-6.7
|
2.1
|
|
Electricity Consumption
|
144.2
|
0.0
|
15.4
|
17.2
|
24.2
|
22.8
|
6.8
|
|
Total County Employment
|
106.6
|
2.0
|
2.1
|
1.5
|
4.1
|
3.2
|
2.6
|
|
Manufacturing
|
92.7
|
-10.9
|
19.4
|
16.4
|
4.5
|
0.9
|
-8.3
|
Jump to: Composite
| Leading
Indicators | Individual
Sectors | The
Bigger Picture
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 decreased by 27.0 percent in
February, indicating a decline in unemployment in the future. The
Index of claims for unemployment insurance now stands at 53.27, a
historically low level which indicates future job growth. The
four month moving average also dropped slightly.
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 February the number of help wanted advertisements increased by 12.9
percent to an Index value of 156.21. The four month moving
average continued to exhibit a slow but steady upward trend, indicating
persistent future
job growth in Humboldt County.
Nationally,
the Conference Board's help wanted advertising Index
reported no change this month from January's high. Says
Conference Board Economist Ken Goldstein: “After two monthly gains, the
latest measure of labor demand is unchanged. The Conference
Board’s Coincident Economic Indicators – a good measure of current
economic activity – has been very steady, and the Leading Economic
Indicators have improved in two of the last three months. That’s the
kind of positive but choppy trendline likely for new job creation over
the next few months.”
(conference-board.org)
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 decreased 4.3 percent this month, to a value of 75.78. 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 out in January, and has begun to rise slightly. The
four month moving average currently stands at 72.78, 3.0 percent lower
than the actual Index value.
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 decreased 25.3 percent in January to an Index
value of 58.58. This is a continuation of January's downward
trend. The fourth month moving average, currently at 83.48, is
also down from last month, though not as dramatically.
|
Key Statistics
|
Leading Indicators
|
|
|
% Change From Previous Month
|
| Median
Home Price* |
$295,000
|
Unemployment
Claims |
-27.0
|
30
Yr.
Mortgage Rate as of 1/15
|
6.125%
|
Help Wanted
|
12.9
|
| Unemployment
Rate** |
6.9%
|
Building
Permit |
-4.3
|
|
|
Manufacturing
Orders
|
-25.3
|
| * 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.
The home sales Index declined significantly in February, dropping 20.2
percentage points to an Index value of 109.16.
Home sales in Humboldt County decreased in January. The home
sales index value declined 4.4 percent to an Index value of
136.6. The
median selling price for a home in Humboldt County was $295,000 this
month, the highest recorded price since the Index began in 1994.
The median selling price does not affect the Index.
Statewide
home prices fell 2.9 percent when compared to
January's median price, but rose 20.4 percent from February 2004's
price to a median selling price of $471,620. The February sales
index increased 3.2 percent when compared
to the same period last year. Despite this
increase, concerns about housing affordability cast a shadow over
rising home prices. “While mortgage interest rates remain low by
historical standards, upper-end markets may soften as affordability
concerns impact households trying to stretch their purchasing power
with adjustable rate loans,” said C.A.R. Vice President and Chief
Economist Leslie Appleton-Young. “Job growth in California in 2004 was
stronger than originally projected, and a strengthening job market this
year should have a positive impact on household incomes and housing
market activity.”
(car.org)
Nationally,
homes sales trends were similar to those seen in Humboldt County.
While existing home sales decreased 0.4 percent in February, home
prices rose significantly. The national median home
price rose 11.0 percent from February of 2004 to $191,000. David
Lereah, NAR's chief economist, said the housing market appears to be in
the early stages of settling down. "In essence, home sales were surging
at unprecedented levels for most of last year," he said. "The cooling
we expect in sales this year means we'll be transitioning from a
white-hot housing market into a very strong market that still favors
home sellers, but should become more balanced as the year
progresses." (realtor.org)
According
to the country's largest mortgage company, Freddie Mac, the nationwide
average for a 30-year fixed rate mortgage as of March 31st, was 6.04
percent with an average 0.7 points. This is up from last month as
well as from last year when
the 30-year fixed rate mortgage averaged 5.52 percent. While
sales of existing homes are slightly reduced,
Freddie Mac expects relatively consistent interest rates will maintain
home
sales overall. “Financial markets currently are very
inflation sensitive, putting upward pressure on mortgage rates,” said
Frank Nothaft, vice president and chief economist. “However, several
economic indicators suggest that the economy isn’t overheating and that
inflation is relatively contained. Looking ahead into the spring
home buying season, we don’t expect mortgage rates to rise too much or
too quickly in the near term. As a result, housing activity should stay
on track for a strong 2005.”
(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 saw decline in February, shrinking 6.8 percent
to an Index value of 138.9. The retail sector is one of the
strongest sectors in the composite Index, and shows 7.0 percent growth
from February of 2004.
Nationwide retail sales, as reported by
U.S. Census Bureau, increased in February.
Seasonally adjusted
sales were $352.1 billion, an increase of 0.5 percent (±0.7%)
from the previous month and up 7.7 percent (±0.8%) from February
2004. Total sales for the December 2004 through February 2005
period were up 8.2 percent (±0.7%) from the same period a year
ago. The December 2004 to January 2005 percent change was revised from
-0.3 percent (±0.7%) to +0.3 percent (±0.3%). (census.gov)
The
Federal Reserve Board reported continued economic expansion across the
nation since January, including "relatively brisk growth in the New
York and San Francisco Districts." Consumer spending continued to
grow steadily, although there was a decline in the sale of electronics
and more expensive retail goods.
(federalreserve.gov)
Looking to the future, the Conference
Board's Consumer Confidence Index declined in February and March.
“Consumers are still quite confident despite recent increases in
unemployment claims and rising prices at the gas pump,” says Lynn
Franco, Director of The Conference Board’s Consumer Research Center.
“Their overall assessment of current economic conditions remains
favorable and their short-term outlook suggests little change in the
months ahead. In fact, while expectations have lost ground, consumers
anticipate the job market will continue to improve, and easing
employment concerns should help keep spending on track.” The
Consumer Confidence Index,
which had improved in January, now
stands at 102.4 (1985=100), down from 104.4 in February.
(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.
The
hospitality sector continued last month's growth, increasing 2.3
percent from January's value to 89.7. This most recent figure is
also up 1.4 percent from the Index value form the same time last year,
and up 11.5 percent from February of 2003. 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. The four
month moving average is currently at 86.2, down 2.4 percent from last
month.
Nationally,
The Federal Reserve Board reported "robust" tourism in several
districts including San Francisco. The strongest activity
occurred where tourism was not hampered by harsh weather.
(federalreserve.gov)
Gasoline
Prices
Gas prices rose sharply this month in
Humboldt County and across the state. According to the California
State Automotive Association, the increase is due to the high cost of
crude oil. The price of crude oil now stands at $56.20 a
barrel. However, the average price of a gallon of gas in
California is 23 cents higher than the national average of $2.05. (csaa.com)
A new study completed by the University of California Energy Institute
examines this difference, pointing California's use of a special
low-polluting blend of gasoline that is only produced by 13 of
California refineries. Because of this, California's gasoline
supply closely matches its demand and refineries are unlikely to
increase production when prices rise. This insensitivity to price
allows for a greater variability in
prices than other states see. (nytimes.com)
For a more local perspective, visit our Special
Projects page for Dr. Eschker's 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 3/15 )
|
Change From Prev. Month
(cents/gal.)
|
| Eureka |
$2.42
|
15¢
|
| Northern CA |
$2.28
|
23¢
|
| California |
$2.28
|
19¢
|
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 February 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.
In February's preliminary employment and
labor force report, the
EDD reported 57,190 people employed in Humboldt
County. This
number is up from January's revised figure, indicating a net gain of
1,260
jobs.
The total civilian
labor force increased by 1,240 people to 61,440. The seasonally
adjusted
total
county employment Index rose 2.0 percent, and now stands
at 106.6. This is a 2.1 percent increase from February of
2004.
Sectoral
changes in Humboldt County employment:
- Overall the service sector posted a net
gain of 800 jobs in February.
- Professional and Business Services gained
100 jobs.
- Information Services gained 100
jobs.
- Leisure and Hospitality gained
100 jobs.
- Local Government gained 300 jobs.
- State Government gainer 100 jobs.
- Other Services gained 100 jobs.
- Overall goods producing employment did
not change in February
The county
unemployment rate dropped from 7.1 percent in January to 6.9 percent
this month.
Both the State and National remain below the county level at 6.1
percent and 5.8 percent respectively. The decrease in the
unemployment rate is pushed by an increase in jobs and tempered by an
increase in the local labor force.
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.
February's
lumber-manufacturing Index sank 10.9 percent from January's revised
figure and now stands
at 92.7. The four month moving average remains on the rise,
pushed up by December and January's high Index values, and now stands
at 97.1. This month's value represents a 19.4 percent increase
from February of 2004.
National economic activity in the
manufacturing
sector, as measured by the Institute of
Supply
Management, grew for the 22nd consecutive month in February. The
PMI registered 55.2 percent as of the April 1st report; a number
over 50 indicates growth. "The manufacturing sector maintained
its strength in March, finishing the first quarter in a relatively
strong position. Growth in New Orders and Inventories helped offset
lower index readings in Production, Supplier Deliveries and Employment.
Price inflation continues to present a problem for manufacturers as the
Prices Index gained significant momentum." said Norbert J. Ore, C.P.M., chair of the
Institute for Supply Management. (www.ism.ws.cfm)
Jump to: Composite
| Leading
Indicators | Individual
Sectors | The
Bigger Picture
The
Bigger Picture
National Economic
News
By: Andrea Walters
On Wednesday, April 20th, students from the Humboldt State Department
of Economics will hold a public debate on social security reform.
As both analyst Laura Lampley and I are members of the government side
of the debate, I would like to take this opportunity to outline both
sides of the argument and invite our Index readers to come to the
debate and hear both sides of what has become a very heated personal,
political, and economic debate.
Specifically we will be debating the government resolution, "The United
States government should partially privatize Social Security retirement
accounts".
For private accounts, the government side argues that any social
security reform that does not include some form of personal pension
accounts will not cure the insolvency we are currently faced
with. The Social Security Administration, in its March 23 press
release, warned that Social Security would begin paying out more than
it takes in by 2017 and surpluses will be exhausted by 2041, one year
earlier than previously estimated. Personal accounts would take
the pressure of the beleaguered Social Security system and give people
greater control over their retirement. Obviously, there would be
restrictions preventing early withdrawals, but workers would have the
freedom to control who barrows and distributes their pension
funds. Personal accounts would also give people the opportunity
to pass unused pension on to their children and other loved
ones.
Around the world pay-as-you-go pension systems like our own are
converting to personal account systems in an effort to cure their own
insolvency. The Regan administration, faced with a similar
situation, increased the payroll tax and retirement age while reducing
benefits and Social Security is still in trouble twenty years
later. The government side believes that the United States should
slowly shift to a personal account pension system, rather than waste
money and time trying to band-aid an ineffective and inefficient
pay-as-you-go system.
Arguing against private accounts, many fear that the cost of
transitioning into a new system will require trillions of dollars in
government spending. Estimates for how much the transition would
cost range between $3 trillion and $15 trillion. Given the
high deficits our government already faces, the cost of such a large
reform would not benefit our economy in general.
Personal accounts, invested in the stock market, are subject to the
fluctuations, and many could face loosing everything in a high risk
investment. Many also argue that the Social Security system
is not broken, but in need of repair, and that replacing one of
America's most popular and largest social service programs is too harsh
a reform. A combination of benefit reductions, increasing the
payroll tax, and expanding the tax base by raising the retirement age
and the cap on those who must pay into Social Security can return the
system to solvency.
For a more in-depth look at the Social Security debate, look for
opposing articles in The Lumberjack or come check out the debate at
4:30pm
on April 20, in room 258 of the Wildlife Building. For more
information, please email The Index.
| 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
American Automobile Association
California Association of Realtors
The Conference Board
The
Federal Reserve Bank's Beige Book
Freddie Mac
Institute of Supply Management
National Association of Realtors
The New York Times
The Social Security Administration
U.S. Bureau of the Census's home
page
U.S. Bureau of Economic Analysis
U.S.
Bureau of the Census's Economic Briefing Room
U.S. Bureau of Labor Statistic
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