INDEX OF ECONOMIC ACTIVITY
FOR
HUMBOLDT COUNTY
Professor
Erick Eschker, Director
Garrett Perks,
Assistant Editor
Haley French, Assistant Analyst
This month's
report
is sponsored by
Jump to: Composite | Leading Indicators | Individual Sectors | Bigger Picture
December
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.
In November, the Index fell somewhat, more than erasing last month's
small gain and posting a decline of 2.2 percent to arrive at a
Composite
Index value of 107.5 (100 = January 1994). The Index was
weighed down by renewed declines in the Home Sales Index, which fell
11.9 percent to rest at 108.0. We also witnessed a
significant drop in the Manufacturing Index which gave up 15.2 percent
and now stands at a seasonally adjusted level of 69.9. The
Hospitality sector was also weak after a respectable performance last
month. In November this Index gave up 7.7 percent with the
Hospitality
Sector Index now at 92.1. Total County Employment
was also off this month by 3.1 percent, falling to an Index value of
102.5. The Retail Sales Index
is this month's only strong performer, advancing 12.6 percent to bring
the Retail Sales Index to 145.9. This advance is a seasonally adjusted
gain, so it reflects performance beyond the normal seasonal holiday
shopping boom.
|
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
|
107.5
|
-2.2
|
-3.8
|
0.1
|
0.0
|
4.3
|
-3.5
|
Sector
|
|
|
|
|
|
|
|
|
Home Sales
|
108.0
|
-11.9
|
-20.7
|
-16.8
|
-23.6
|
-0.6
|
-11.8
|
|
Retail Sales
|
145.9
|
12.6
|
-1.9
|
3.5
|
8.2
|
20.2
|
4.3
|
|
Hospitality
|
92.1
|
-7.7
|
1.7
|
0.3
|
2.5
|
-4.5
|
-3.5
|
|
Electricity Consumption
|
131.5
|
0.0
|
3.1
|
16.9
|
16.1
|
21.0
|
7.1
|
|
Total County Employment
|
102.5
|
-3.1
|
-1.3
|
-1.0
|
-1.3
|
1.6
|
-2.0
|
|
Manufacturing
|
69.9
|
-15.2
|
-19.7
|
-10.7
|
-13.6 |
-19.4
|
-29.3
|
Jump to: Composite
| Leading Indicators | Individual Sectors | Bigger Picture
Leading
Indicators
These
Indices track 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)
manufacturing orders. The graphs in this section use a four-month
moving average of seasonally adjusted index values in order to smooth
month-to-month
volatility and render the longer-term trend more apparent.
Graphic description: The seasonally adjusted Index of Claims for
Unemployment Insurance is represented above by the blue area. The
red line shows the four month moving average which attempts to show the
overall trend in the data with less monthly volatility.
The Index of claims for unemployment insurance is an indicator of
negative economic activity. This leading indicator rose by 4.7
percent this month, which was a smaller change than the 7.3 percent
decline last
month. The Index now stands at 55.02. This is still a low number, 6.4
percent lower than the same period last year and around 35 percent
below historic levels for the month of November. This continues
to be a positive indicator for future employment in Humboldt County.
Graphic description: 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 show the
overall trend in the data with less monthly 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 Eureka
Times
Standard. In November the Index decreased slightly,
showing a 3.0 percent decline to
an Index value of
162.5. This is a still a fairly high number. The decline
this month has not nearly cancelled the gains of the last two months
which together totaled 18.4 percent. This indicator bodes well
for employment in the County in the future.
Help
wanted advertising in newspapers nationwide increased slightly this
month according to the
Conference Board's Index of help wanted advertising. This Index
rose a single point
to 39. This is three points higher than the number a year ago.
Ken Goldstein, who is a labor economist with the Conference
Board, is not terribly excited by these gains. He notes that the
gains
are not stellar even if the impact of the recent hurricanes is
eliminated, and that the gains are mitigated by the fact that online
help wanted advertising has been declining in recent months. He
foresees tepid labor market conditions at the national level in the
post-holiday season lasting until the reconstruction effort in the wake
of the hurricanes reaches its height. He believes that when this
happens it will provide a lift to the national labor market.
(conferenceboard.org)
Graphic description: 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 show the
overall trend in the data with less monthly volatility.
The Index of building
permits issued gives insight to future home sales and
construction. In November the Index of building permits recovered
much of last month's loss, rising 26.1 percent to a value of
59.6. This is still 13.9
percent lower than November of last year. As you can clearly see
from this
indicator's recent activity, this measure experiences a great deal of
month
to month volatility. The four month moving average, used to
determine longer term trends, appears to be trending slowly downward
from its peak in October of 2004 when it reached 75.6. This may be
consistent with a slow let down in what has been a booming real estate
market.
Graphic description:
The seasonally
adjusted Index of Manufacturing Orders
is represented above by the blue area. The
red line shows the four month moving average which attempts to show the
overall trend in the data with less monthly volatility.
The Index of
manufacturing orders shows expectations for future manufacturing
sales. This leading indicator rose dramatically again this month,
now standing at 118.7, which is 31.9 percent higher than last month's
number. This is a very high number historically. It remains to be seen
whether these expected orders will come to fruition or not, but if they
do it will
represent a definite boon to Humboldt County manufacturers.
Although it isn't
clear what is driving these increases in manufacturing orders, one
conjecture is that hurricane recovery and reconstruction is causing
increased orders to county lumber producers.
|
Key Statistics
|
Leading Indicators
|
|
|
% Change From Previous Month
|
| Median
Home Price* |
$319,450
|
Unemployment
Claims |
4.7
|
30
Yr.
Mortgage Rate as of 01/04/06
|
6.0%
|
Help Wanted
|
-3.0
|
| Unemployment
Rate** |
5.8%
|
Building
Permit |
26.1
|
|
|
Manufacturing
Orders
|
31.9
|
| * 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.
November saw a sharp decline in the home sales Index on the same order
as the decline we saw in September. The
seasonally adjusted Index value fell 11.9 percent to 107.95. This
is almost 21 percent lower than November of 2004, and is the lowest
value since 2001. This reflects a softening of what has been a
booming housing market. The median price of a home sold in
November fell to
$319,450, from last month’s median selling price of $331,055. The
median selling price is not
adjusted for inflation and does not affect the Index.
See
the Bigger Picture section below to learn about Humboldt County's
high-priced neighbors.
Showing
slightly less evidence of slowdown, California's
median selling price, as reported by the California Association of
Realtors, increased in November by 1.8 percent to
$548,400. This
is a 16.2 percent increase over the median selling price for the same
month last year. The C.A.R projects that median home sale prices in
California in the year ahead will appreciate by ten percent and total
units sold in the year ahead will be two percent less than in 2005.
These projections were made in the California Association of Realtors'
2006 Housing Market Forecast.
(car.org)
The
National Association of Realtors
reports that existing home sales at the national level eased 1.7
percent to a seasonally adjusted rate of 6.97 million units. This
is 0.1 percent lower than the rate in November 2004. David
Lereah, the NAR chief economist, credited the softening in sales
to increases in mortgage rates. For the year ahead, Mr. Lereah,
expects 2006 to be a slower year, but still strong, and further, that
this slowing will be healthy in the long run for what has been a
booming industry. He expects 2006 to be the second strongest
year on record. (realtor.org)
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.
Retail Sales
The
Index value for 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 sales sector expanded significantly in September, rising
12.6 percent to
a seasonally adjusted Index value of 145.9. This is a 1.9
percent decrease from the
same period last year. This new level of 145.9 is a marked
improvement over previous months this year, but is still not
historically impressive. The Retail Sales Index has been hovering
between 120 and 150 for a few years, beginning with the last quarter of
1998.
Prior to that time the Index was generally trending upward. Since that
time the trend in the Index has been rather flat. For the past
twelve months the trend in the Index has been somewhat
downward.
National food service and retail sales,
as reported by
U.S. Census Bureau, increased slightly in November. Seasonally
adjusted
sales were
$353.9 billion, an increase of 0.3 percent (±0.7%) from the
previous
month and 6.3 percent (±0.8%) higher than November 2004.
(census.gov)
National consumer confidence as measured
by the Conference Board surged this month by 5.4 percent and now stands
at 103.6. A level of 100 is equivalent to the base
year of 1985’s level. The Present Situation Index, which measures
consumers' view of current economic circumstances surged as well by 7.3
percent to 121.5 from 113.2. Also, the Expectations Index
which measures consumers' expectations of future economic conditions
increased to by 3.6 percent to 91.6 from 88.4 last month.
These are all positive indicators for consumer spending, and for the
economy as a whole. (conferenceboard.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 which attempts to show the
overall trend in the data with less monthly volatility.
The
hospitality sector fell 7.7 percent in November to an Index value
of 92.1. This represents a 1.7 percent increase from the same
period last year. This seasonally adjusted Index differs
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 from month to month beyond
seasonal
variability, the overall trend is fairly level.
Gasoline
Prices
The California State Automobile
Association (CSAA) reports that county gas prices have continued to
fall in the past month. Similar trends are at work at the state and
national
levels as well. The average price per gallon of gas in
Eureka fell eight cents from November to December. More dramatic
declines
were seen in the broader area of Northern California and in the state
at large which experienced 31 and 29 cent declines respectively.
Prices as of December 13, 2005 at the state level came to $2.29 and
in Northern California average pump prices came to $2.25.
(csaa.com)
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.
Average Price*
(as of 12/13/05)
|
Change From Prev. Month
(cents/gal.)
|
| Eureka |
$2.42
|
-08¢
|
| Northern Ca |
$2.25
|
-31¢
|
| California |
$2.29
|
-29¢
|
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 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. Because we
collect our data for this sector quarterly, values are estimated in
months between those in which the data are collected. The
estimate is made in such a way as not to affect the index positively or
negatively until data are collected. Our estimates
are revised when the quarterly data are received. We will report
activity in this sector each quarter, when data are collected.
November's electricity consumption Index is estimated at 120.2,
unchanged
from last month.
Total
County
Employment
The Index value of the employment sector
is based on seasonally adjusted total employment as reported by the
Employment Development Department.
Preliminary employment and
labor force data for November reported 57,900 people employed in
Humboldt
County. This is a net loss of 900 jobs from October's revised
figure of 58,800. The largest job loss was from natural resources
and mining. The
total civilian
labor force also shrank by 700 people to 61,500. After adjusting
for
seasonal variation, the employment sector's Index value contracted,
decreasing 3.1
percent to 102.5. This represents a 1.3 percent decrease from the
same period
last year. There were around 100 more unemployed individuals in the
county in November than in October. The rest of the decline in the
number of employed persons in the county consists of individuals who
left the county labor force altogether and are no longer seeking
employment in the county. These individuals may have moved out of the
county, retired, or simply become discouraged with their prospects for
finding work and left the labor force. In an attempt to
differentiate those who do not work
and who do not wish to find work, such as the retired and home-makers,
from
those who are genuinely unemployed, economists do not count anyone who
is not seeking employment as an unemployed person. This is not an
ideal method, but it is the one currently in use. For this reason, the
100 person increase in the number of unemployed in the county reflects
only those who do not have work but are seeking it in the county.
Sectoral
changes in Humboldt County employment:
- The private service sector lost 200 jobs.
- Private goods producing lost 200 jobs
- Government employers gained 200
jobs.
The county
unemployment rate rose in November to 5.8
percent. The state and national unemployment rates also
rose. California's unemployment rate rose
to 5.1 percent, from 5.0 percent in the previous month, while the
national
unemployment rate rose to 4.8 percent from 4.6 percent in
October. Humboldt County's unemployment
rate remains above California and the United States levels.
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 which attempts to show the
overall trend in the data with less monthly volatility.
In
November, lumber based manufacturing fell again and precipitously.
Manufacturing decreased 15.2
percent to an Index value of 69.9. This is a particularly curious
contraction in light of the dramatic increase last month in month-ahead
expected manufacturing orders.
It is not clear what explains the discrepancy between expected orders
and actual output.
Jump to: Composite
| Leading Indicators | Individual Sectors | Bigger Picture
The Bigger Picture
Humboldt County Surrounded by Most
Overvalued Housing in the Nation
A recent report shows that seven of the twenty most
overvalued housing markets in the nation are in cities near Humboldt County. Those
cities range from Napa
and Sacramento in the south to Bend
and Medford, Oregon in the north.
Redding California is listed at number
seventeen and 56% overvalued. Further,
thirteen of the twenty most overvalued housing markets are in California.
The full list is given below.
Rank
|
City
|
%
Overvalued
|
| 1 |
Naples,
FL |
84% |
| 2 |
Merced, CA |
77% |
| 3 |
Salinas, CA |
75% |
| 4 |
Port St. Lucie, FL |
72% |
| 5 |
Stockton, CA |
72% |
| 6 |
Madera, CA |
70% |
| 7 |
Santa Barbara, CA |
70% |
| 8 |
Modesto, CA |
67% |
| 9 |
Napa, CA |
65% |
| 10 |
Riverside, CA |
65% |
| 11 |
Medford, OR |
64% |
| 12 |
Sacramento, CA |
61% |
| 13 |
Atlantic City, NJ |
59% |
| 14 |
Chico, CA |
59% |
| 15 |
Fresno, CA |
58% |
| 16 |
West Palm Beach, FL |
57% |
| 17 |
Redding, CA |
56% |
| 18 |
Santa Rosa, CA |
56% |
| 19 |
Bend, OR |
56% |
| 20 |
Sarasota, FL |
56% |
Source:
http://money.cnn.com/2005/12/29/real_estate/buying_selling/handicapping_housing_markets/
“House Prices in America”
was written by Global Outlook and National City. They
construct a model of housing prices from
1985 to 2005 which controls for population density, mortgage rates, and
income. A city’s housing market is
“overvalued” if
the actual price of housing is greater than the price predicted by
their
model.
They do not consider Humboldt County
because they don’t have data for the county.
But they show that some of the most overvalued cities in California are
mid sized
cities that are outside major metropolitan areas. The
Index of Economic Activity for Humboldt
County
recently compiled
data for Humboldt County and we found that the county P/E
ratio had increased tremendously over the past few years.
Together, these two reports suggest that Humboldt County
housing prices will face a period
of adjustment.
Jump to: Composite
| Leading Indicators | Individual Sectors | Bigger Picture
| 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
California
Employment Development Department
The Conference Board
The Federal
Reserve Board Beige Book
Freddie Mac
Institute of Supply Management
National Association of Realtors
U.S.
Bureau of the Census's Economic Briefing Room
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