INDEX OF ECONOMIC ACTIVITY
FOR
HUMBOLDT COUNTY
Professor
Erick Eschker, Director
Jessica Digiambattista, Assistant Editor
Andrea Walters, Assistant Analyst
This month's
report
is sponsored by
California State and Federal Employees' Credit Union #20
September 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 declined slightly in August. The
composite Index of Economic Activity dropped 1.1 percent from last
month's revised number and now stands at 107.8 (100 = January
1994). The Index was pulled downward by a drop in home
sales, as well as declines in manufacturing and hospitality. As
many economists predicted, home sales are beginning to slow. The
summer months are tyipically high sales times in the housing
industry. However, after adjusting for this expected seasonal
variation,
home sales declined by 17.4 from the previous month. The home
sales index now stands at 120.0. A similar type of seasonality
can be seen in the hospitality sector. Occupancy rates at local
hotels, motels and inns are typically at their highest during the
summer months when more visitors come to the north coast. Real
growth in this sector can only be measured after seasonal fluctuations
have been taken into account. In August, the hospitality index
(seasonally adjusted), declined 3.6 percent from the previous
month. This is the second consecutive monthly decline in the
hospitality sector. Please note that the hospitality index is
based on a sample of local hotels, motels, and inns in Humboldt
County. This sample represents a diversity of types of
establishments, both locally owned and nationwide chains. The
hospitality index measures economic activity in the hospitality sector
throughout Humboldt County including some of the County's smaller
communities as well as Eureka and Arcata. Manufacturing
also declined in August, the index for this sector dropped 3.6 percent
from last month's revised figure to stand at 76.9. Both the
retail and employment sectors posted gains in August. Changes in
the retail sector are important to note as they capture residual
economic activity from many industries in the County. The retail
sales index increased 5.2 percent to stand at 147.3, it's third highest
level ever. The employment sector gained 0.7 percent and now
stands at 103.1. When related back to the base month January
1994, this shows that employment in Humboldt County has grown 3.1
percent in the past decade. Slow growth in this sector is not
unusual given the relatively low population growth rate in Humboldt
County. Additionally, the County's unemployment rate dropped down
to 5.4 percent, it's lowest level this year. The only sector to remain
unchanged in August was electricity consumption, which is still
estimated at 113.2.
|
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
|
107.8
|
-1.1
|
-0.4
|
-0.6
|
-2.9
|
-3.8
|
-1.9
|
Sector
|
|
|
|
|
|
|
|
|
Home Sales
|
120.0
|
-17.4
|
2.3
|
-23.4
|
-10.9
|
-12.7
|
12.0
|
|
Retail Sales
|
147.3
|
5.2
|
-2.1
|
4.5
|
6.9
|
21.3
|
18.2
|
|
Hospitality
|
94.9
|
-3.6
|
-2.4
|
-3.8
|
-4.1
|
-2.9
|
-5.2
|
|
Electricity Consumption
|
113.2
|
0.0
|
5.4
|
13.4
|
-12.0
|
-12.5
|
---
|
|
Total County Employment
|
103.1
|
0.7
|
0.4
|
0.7
|
0.5
|
-2.4
|
-1.6
|
|
Manufacturing
|
76.9
|
-3.6
|
-6.2
|
-3.7
|
-13.2
|
-28.1
|
-26.7
|
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 5.5 percent in
August, pulling the four month moving average downward.
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 dropped after
last month's huge increase. Even after losing 11.0 percent this
index remains at one of it's highest levels this year. 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 tick
upward slightly in August.
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 dropped 2.4 percent in August, to stand at
80.43. However, the four month moving average is still reflecting
an upward trend.
|
Key Statistics
|
Leading Indicators
|
|
|
% Change From Previous Month
|
| Median
Home Price* |
$265,000
|
Manufacturing
Orders
|
-2.4%
|
30 Yr.
Mortgage Rate as of 6/30
|
5.875%
|
Building
Permits |
-11.0%
|
| Unemployment
Rate** |
5.4%
|
Unemployment
Claims |
-5.5%
|
| * 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.
In August, Humboldt County home sales dropped for the second
consecutive month. The home sales index is down 17.4 percent and
now stands at 120.0. This month's decrease is in line with
economist's predictions that the housing market will cool off toward
the end of the year. However, 2004 is still poised to be one of
the highest sales years on record for the local housing market.
The median home price pushed upward again, reaching $265,000, the
highest price on record. Prices will likely remain high, while
interest rates are low and buyers have added purchasing power.
Statewide
home prices increased, while sales declined.
The median home
price in California is $474,370, up 2.6 percent from the previous
month, and up16.8 percent from August 2003. "We anticipated a
decrease in home sales last month compared to August 2003," said C.A.R.
President Ann Pettijohn. "Last summer, mortgage interest rates were at
their lowest levels in more than 30 years and monthly existing home
sales hit an annualized all time high of nearly 646,000 units."
(www.car.org)
David
Lereah, chief economist for the National Association of Realtors
commented on home sales throughout the country. "Since April
we've experienced three out of the four strongest months on record for
existing-home sales, and August was the sixth highest," he said. "We're
at a more sustainable level now, but long-term there should be some
additional easing toward the end of the year. In fact, the August sales
pace is close to what we project for total sales this year."
(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 September 30th, was
5.72
percent with an average 0.6 points. “Mortgage rates didn’t move
much this week, keeping us on target with industry forecasts for the
year,” said Frank Nothaft, Freddie Mac vice president and chief
economist. “Our forecast is for the 30-year fixed-rate mortgage rate to
remain below six percent for the rest of the year and not much higher
than that for 2005. Low mortgage rates continue to keep the housing
market vibrant. Indeed, the Mortgage Bankers Association figures show
that applications for home purchase and refinancing – both of which had
fallen off somewhat – have rebounded to the higher levels experienced
earlier in the year.”
(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 improved in August, and gained back some of the
previous month's losses. A gain of 5.2 percent from last month
puts the retail sales index at 147.3. However, this sector is
down 2.1 percent when compared to Ausust 2003.
Nationwide retail sales, as reported by
The
Commerce Department, decreased in August.
Seasonally adjusted
sales were $335.2 billion, a decrease of 0.3 percent (±0.7%)
from the previous month, but up 4.9 percent (±1.0%) from August
2003. (census.gov)
The latest release from the
Conference Board shows that consumer confidence declined again in
September.
The
Consumer Confidence Index, which now stands at 96.8 (100=1985), is down
1.9 percentage points from last month's figure. (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 declined for the second consecutive month.
After dropping 3.6 percent, from last month, the index for this sector
now stands at 94.9. This most recent figure is down compared to
the same month in previous years. The index declined from it's
August 2003 and August 2002 levels by 2.4 percent and 3.8 percent,
respectively. 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 varitation is removed so that changes
over time can be compared more appropriately.
Gasoline
Prices
Gas prices are beginning to stabilize in
California, but consumers are still feeling the cruch at the
pump. "At least people who are on a tight budget have some idea
how much of their checking account will be drained into their gas
tanks," said Sean Comey, spokesman for AAA of Northern California.
"From the consumer's perspective, however, there's still a lot of room
left for improvement." (www.csaa.com)
Average Price*
(as of 9/14 )
|
Change From Prev. Month
(cents/gal.)
|
| Eureka |
$2.35
|
-4¢
|
| Northern CA |
$2.07
|
-15¢
|
| California |
$2.09
|
-14¢
|
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 July is 113.2,
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 the preliminary report for August,
the
EDD reported that 56,900 people were employed in Humboldt
County. This
number is up from July's revised figure, indicating a net gain of 800
jobs.
The total civilian
labor force increased by 200 people to 60,200. The seasonally adjusted
total
county employment index rose 0.7 percent, and now stands
at 103.1.
Sectoral
changes in Humboldt County employment:
- Overall the service sector posted a net
gain of 400 jobs in July.
- Food and Beverage stores gained 100 jobs.
- Miscellaneous Retail gained 100 jobs.
- Professional and Business Services lost
100 jobs.
- Food Services and Drinking Places gained
100 jobs.
- Arts and Entertainment lost 100 jobs.
- Local government gained 300 jobs.
- Overall goods production employment was
unchanged in August.
The unemployment rate
declined sharply in August. The measure which now stands at 5.4
percent is lower than the state average and on par with the rest of the
nation. The rate fell despite an increase in the size of the
labor force, and local government cutbacks which took effect the
previous month.
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
July the lumber-manufacturing index dropped 3.6 percent from last
month's revised figure and now stands
at
76.9. The index for this sector has not reached above the 100
level
since January 2001. This shows a long run decline in the local lumber
industry.
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.
Economic activity in the manufacturing
sector, as measured by the Institute of
Supply
Management, grew again in September. The PMI registered 58.5 in
the latest release, a number over 50 indicates growth. "September
was surprisingly strong given the recent slowing of growth in new
orders. Production and employment were particularly encouraging as both
indexes increased when compared to August. Any concern over inventory
growth would seem to be offset by the decline in customer inventories,"
said Norbert J. Ore, C.P.M.,
chair of the Institute for Supply Management. (www.ism.ws.cfm)
The
Bigger Picture
Spotlight on the Election
By: Jessica Digiambattista
As Americans head to the polls on November 2nd, we will have many
important issues to weigh. With our politicians far away in
Washington D.C., and their attention even farther way in the Middle
East, it is easy to understand why so many Americans feel politically
unempowered. Yet, whether we realize it or not, national policies
have very real impacts on our lives and our economy. Here
is a look at some of the economics behind the politics.
The War on Terror, and the war in Iraq are big issues this
election. Whether you are a service person who witnessed the fall
of Baghdad, or a protestor who marched in the streets of San Francisco,
we are all impacted by this country's decision to engage in acts of
war. The federal government has spent tremendous amounts of money
on the war. Funding for our foreign excursion came in the form of
debt, much of which is owned by entities outside the U.S. During
fiscal year 2003, the federal government posted the highest ever budget
deficit in history. While economists agree that budget deficits
are sometimes necessary during economic downturns, we are also warned
of the hazards of becoming too indebted. Borrowed money must
eventually be repaid, and with interest. Additionally, too much
borrowing by the government will crowd out business investment, an
important stimulus to our economy. President Bush's challenger,
John Kerry argues that the current administration is the first ever to
oversee a decline in business investment and this is detrimental to our
economy (www.johnkerry.com). The President's Plan for Creating
Opportunity for America's Workers does not address the issue of
business investment, but does state that the President will cut
the deficit in half over the next five years (www.georgewbush.com).
The nation's current budget woes are also the result of the three tax
cuts, which decreased revenue for the federal government. The
idea behind the tax cut, aside from it's political popularity, is
this: If the government allows people to keep a greater
percentage of their income, they will spend some of it (consumption)
and save some of it (investment). An increase is consumption may
trigger empolyers to hire more workers as business picks up. In
theory this spending mulitplies through the economy fueling economic
growth. The portion of income that is not spent will be saved,
presumably with a bank or finanical investment firm. These
savings can then be loaned to businesses who need finanical capital to
cover start up costs or to expand or modernize current
operations. In theory, this investment will also fuel economic
growth. However, we have not seen the kind of growth that the
theory behind the tax cuts might suggest. One reason, as some
economists believe, is that the economic effects of tax cuts can take a
long time to mulitply through the economy. Another reason is that
increased government borrowing due to the deficit can eat up the
investment intended for businesses. This may be more of an issue
if a tax cut is directed at the wealthy, who save rather than spend, a
larger portion of this extra income. If elected to a second term
President Bush will make permenant the tax cuts he passed during his
first term (www.georgewbush.com). Challenger John Kerry, cites
experts who claim the Bush tax cuts have not been an effective
stimulus. Kerry also argues that the tax cuts unfairly benefit
the wealthy at the expense of the working class (www.johnkerry.com).
Fiscal responsibility is just one of many economic issues in this
election, but it is an important one. Deficits turn into long
term debt which must be paid off in the future. Spending on
public goods such as schools, roads, infrastructure, and other domestic
programs will be limited in the future by the obligation to pay off the
debts of today. While nobody like paying taxes, we must also
recognize that our society benefits from the public goods that are
provided by our tax dollars. So whether you are on the left or
the right or somewhere in between we all benefit from understanding the
economic forces that drive politics in America.
| 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 San Francisco Chronicle web site
The New York Times 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
The Milwaukee Journal Sentinel
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