INDEX OF ECONOMIC ACTIVITY
FOR
HUMBOLDT COUNTY
Professor
Erick Eschker, Director
Jessica Digiambattista, Assistant Editor
Garrett Perks, Assistant Analyst
Andrea Walters, Assistant Analyst
This month's
report
is sponsored by
Redwood Region Economic
Development Commission
August 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.
The Humboldt County economy contracted slightly in July. The
composite Index of Economic Activity For Humboldt County dropped 3.1
percent this month and now stands at 108.6. All major sectors of
the local economy experienced declines this month, except for the
electricity consumption sector. A cooling off in the housing
market lead to lower home sales and home prices this month.
Though the home sales declined this month, this sector remains at
historically high levels. After dropping 7.4 percent, the home
sales index now stands at 145.3. Huge reductions in local and
state government employment caused a significant drop in the local
employment sector. The employment index declined 0.3 percent to
102.4. The boom seen early in the tourist season fizzled out in
July. After dropping 6.6 percent, the hospitality sector now
stands at 98.4. The reduction in tourism coupled with poor
consumer confidence related to government layoffs contributed to a
decline in the retail sector. The retail sales index declined 7.4
percent to 140.1.
|
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
|
108.6
|
-3.1
|
0.3
|
0.3
|
-1.6
|
-2.6
|
-3.8
|
Sector
|
|
|
|
|
|
|
|
|
Home Sales
|
145.3
|
-7.4
|
12.8
|
9.5
|
18.1
|
25.0
|
14.5
|
|
Retail Sales
|
140.1
|
-7.4
|
2.4
|
-1.7
|
-0.3
|
13.2
|
9.5
|
|
Hospitality
|
98.4
|
-6.6
|
-1.0
|
-1.2
|
0.9
|
-6.4
|
-0.5
|
|
Electricity Consumption
|
113.2
|
3.2
|
1.7
|
12.9
|
-9.0
|
-15.6
|
---
|
|
Total County Employment
|
102.4
|
-0.3
|
-1.2
|
-0.9
|
-0.9
|
-1.6
|
-3.0
|
|
Manufacturing
|
76.1
|
-2.8
|
-8.8
|
-11.5
|
-15.9
|
-26.4
|
-30.3
|
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 increased by 5.8 percent in
July. However, the four month moving average remains near its
lowest point in the past twelve months.
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 jumped 148.7 percent
from last month to its highest level since 1997. This change in
the index was great enough to pull the four month moving average
upward, counteracting the large drop last month.
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. Producer expectations continued to trend upward this
month, increasing 43.5 percent. After declining in the first and
second quarters, the index of manufacturing orders is now giving
positive signals for third quarter manufacturing sales.
|
Key Statistics
|
Leading Indicators
|
|
|
% Change From Previous Month
|
| Median
Home Price* |
$259,450
|
Manufacturing
Orders
|
43.5%
|
30 Yr.
Mortgage Rate as of 6/30
|
6.25%
|
Building
Permits |
148.7%
|
| Unemployment
Rate** |
6.3%
|
Unemployment
Claims |
5.8%
|
| * 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.
Humboldt County home sales leveled off in July, after setting a new
record high last month. The home sales index dropped 7.4 percent
to stand at 145.3. Though July's figures are down from last
month, the long term trend still shows growth in this sector.
Many economists expect home sales to level off throughout the rest of
the year, as interest rates rise and the housing market begins to
cool. Home prices followed a similar pattern as home sales.
The median home price leveled off this month at $259,450, the second
highest price level ever recorded. Strong demand and purchasing
power from low interest rates continued to fuel the historically high
price levels.
Both home sales and home prices mirrored the trends seen throughout the
state and the rest of the nation.
Statewide
home prices also leveled off, but remain at
historically high levels. The median home
price in California is $463,540, down 1.1 percent from the previous
month, but up 21.4 percent from July 2003. "While year-to-date
sales have increased 7.4 percent, we expect to see them level off in
the coming months as increases in the supply of homes and interest rate
expectations temper consumers' concerns about the recent pace of the
real estate market," said Leslie Appleton-Young, C.A.R.'s vice
president and chief economist. (www.car.org)
David
Lereah, chief economist for the National Association of Realtors
commented on home sales throughout the country. "Prior to this
year, the July sales pace would have been a real eye-popper," he said.
"The fact is – it remains so. The present level of home sales activity
is considerably above last year's record, and the new benchmark we'll
set in 2004 is a significant contributor to overall U.S. economic
growth." (www.realtor.org)
Graphic Description: The Humboldt County Housing Affordability Index is
compiled by the Humboldt Association of Realtors, and shows the
percentage of households that can afford a median priced home in
Humboldt County. Data for 2004 is not yet available.
According
to the country's largest mortgage company, Freddie Mac, the nationwide
average for a 30-year fixed rate mortgage as of September 2nd, was 5.77
percent with an average 0.8 points. "The drop in consumer
confidence left an unsavory taste in the market, creating a fear that
consumer spending will slow," said Frank Nothaft, Freddie Mac vice
president and chief economist. "Because consumer spending constitutes
about 2/3 of the economy, this could seriously impact economic growth.
As a result, interest rates tend to retreat to lower levels."
(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 Humboldt County retail sector stumbled in July. After
dropping 7.4 percent the retail sales index now stands at 140.1. This
decline is probably due to poor consumer confidence caused by the
significant loss of jobs in the local and state government sectors.
Nationwide retail sales, as reported by
The
Commerce Department, increased in July.
Seasonally adjusted
sales were $336.5 billion, up 0.7 percent (±0.8%) from the
previous month and up 6.5 percent (±1.0%) from July 2003. (census.gov)
The latest release from the
Conference Board shows that consumer confidence dropped in August.
The
Consumer Confidence Index, which now stands at 98.2 (100=1985), is down
7.5 percentage points from last month's figure. “The slowdown in
job growth has curbed consumers’ confidence,” says Lynn Franco,
Director of The Conference Board’s Consumer Research Center. “The level
of consumer optimism has fallen off and caution has returned. Until the
job market and pace of hiring picks up, this cautious attitude will
prevail.” (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.
Tourism
fizzled down in July. The
hospitality index decreased 6.6 percent and now stands at 98.4.
The index has only reached above the 100 mark three times since
September 2001.
Gasoline
Prices
Gas prices droped again, but there is
still cause for concern. "This is welcome relief for consumers,
but there are still some troubling market forces at work right now,"
said Sean Comey, spokesman for AAA of Northern California. "Extremely
high crude oil prices are looming on the horizon. If they stay at or
near record high levels, the cost of that commodity could reverse the
current downward trend at the pump." (www.csaa.com)
Average Price*
(as of )
|
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, down 3.2
percent from last month's figure.
Revised electricity index figures for the second quarter are as follows:
- April's electricity index was revised to 118.8.
- May's electricity index was revised to 110.5.
- June's electricity index was revised to 109.7.
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 July,
the
EDD reported that 55,900 people were employed in Humboldt
County. This
number is down from Junes revised figure, indicating a net loss of 800
jobs.
The total civilian
labor force decreased by 700 people to 59,700. The seasonally adjusted
total
county employment index fell 0.3 percent, and now stands
at 102.4. All of the jobs lost were in the state government
education and local government sectors. These reductions in
employment reflect budget cuts implemented July 1st, which is the first
day of the fiscal year for the state.
Sectoral
changes in Humboldt County employment:
- Overall the service sector posted a net
loss of 1600 jobs in July.
- Arts and entertainment gained 100 jobs.
- State government education lost 400 jobs.
- Local government lost 1300 jobs.
- Overall goods production employment
gained 100 jobs
- Natural resources and mining gained 100
jobs.
- Manufacturing remained unchanged at 4,100
jobs.
July's
unemployment rate increased again, but still remains lower than the
statewide average. An decrease in the size of the labor force
mitigated the drop in total employment. The unemployment rate
now stands at 6.3 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 60 percent of total county manufacturing employment.
In
July the lumber-manufacturing index dropped 2.8 percent and now stands
at
76.1. 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, shows positive growth in August. The PMI registered
59.0 in the latest release, a number over 50 indicates growth.
"August was another good month for the manufacturing sector. While the
near-term outlook remains positive, both the Inventories and Customers'
Inventories Indexes show signs of inventory building. Such a build may
be justified if it is to meet additional sales demand, and if new
orders and production remain strong," said Norbert J. Ore, C.P.M.,
chair of the Institute for Supply Management. (www.ism.ws.cfm)
The
Bigger Picture
National Economic News
The
Federal Reserve Bank its target short term interest rate by one-quarter
of a percentage point. This is the second such increase by the
Fed since May 2000. Fed chairman, Alan Greenspan, acknowledged a
recent "soft patch" in the economy, but sighted that slow down as only
temporary. In a press release following the most recent rate
increase the Fed explained its actions. "In recent months, output
growth has moderated and the pace of improvement in labor market
conditions has slowed," the Fed wrote. "This softness likely owes
importantly to the substantial rise in energy prices. The economy
nevertheless appears poised to resume a stronger pace of expansion
going forward." (cnn.com)
The economic impacts of Hurricane Charley will be felt long after the
storm has passed. The hurricane tore through the heart of
Florida's tourist and citrus production regions. Tourism, a $50
billion a year industry in Florida will likely suffer negative
repercussions from the images of the damaged areas being shown in news
broadcasts. Charley's path also ripped through Florida's top
citrus producing counties. The citrus industry which averages $9
billion annually in the state has suffered substantial crop losses due
to the recent weather. (msnbc.com)
State Economic News
A study released by UCLA researchers predicts modest economic growth
for California during the next year. Researchers predict uneven
job growth in the state. Southern California will produce most of
the state's new jobs, while tech-heavy Bay Area payrolls will continue
to stagnate. The study predicts that the state's unemployment
rate will drop to 6.3 by the end of 2004 and continue decreasing in
2005 and 2006. Researchers assert that a weak dollar, the
statewide housing boom, and economic growth in Japan and Asia are all
contributing to California's economic growth. (Reuters.com)
| 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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