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
California State and Federal
Employees' Credit Union #20
February 2005
Graphic description: The seasonally adjusted composite Index
is represented in the graph above by the blue area. The red
trend line 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 continued to expand in January. The
composite Index of Economic Activity rose 1.9 percent from last
month's number and now stands at 115.0 (January
1994 = 100). Growth in the hospitality, retail, and employment
sectors was tempered by contractions in home sales and
manufacturing. Following several months of record figures, the
home sales Index declined in January. This month the home sales
Index decreased by 4.4 percent to a value of 136.6. This slowing
trend is consistent with expert expectations. Manufacturing also
declined slightly from last month's high, decreasing by 0.4 percent to
a value of
104.1. The manufacturing Index is 30.2 percent higher than it was
at this time last year. The hospitality sector showed the largest
increase from December by rebounding 13.9 percent. Though still
lower than last year's figures, January's hospitality Index shows
growth with an Index value of 87.8. The hospitality sector is
based on occupancy rates at
local
hotels, motels and inns and represents a broad
selection of both locally owned establishments and nationwide
chains. Due to the variability of the hospitality index, we
recommend looking at the four month moving average for perspective on
the sector's general trend. Both
retail sales and employment sectors increased moderately
this month. The Index for retail sales grew by 1.3 percent to
149.5 in January. This is an increase of 11.0 percent from
January 2004. This is consistent with a national trend of strong
sales in the retail sector. The employment
Index for Humboldt County increased by 1.5 percent to an
index value of 104.5 despite a high unemployment rate. After
enjoying an unemployment rate lower
than the state and national averages last fall, Humboldt County's
preliminary unemployment
rate of 7.0 surpasses state and national rates once again.
|
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
|
115.0
|
1.9
|
6.7
|
3.5
|
6.2
|
6.6
|
3.6
|
Sector
|
|
|
|
|
|
|
|
|
Home Sales
|
136.6
|
-4.4
|
1.7
|
-2.1
|
-1.1
|
14.8
|
29.2
|
|
Retail Sales
|
149.5
|
1.3
|
11.0
|
6.0
|
7.4
|
12.2
|
5.8
|
|
Hospitality
|
87.7
|
13.9
|
-1.1
|
-11.1
|
-4.0
|
-6.0
|
-0.4
|
|
Electricity Consumption
|
137.33
|
1.0
|
17.2
|
17.7
|
20.7
|
32.3
|
7.0
|
|
Total County Employment
|
104.5
|
1.5
|
-0.9
|
0.2
|
2.0
|
0.2
|
1.3
|
|
Manufacturing
|
104.1
|
-0.4 |
30.2
|
17.3
|
20.8
|
0.9
|
-6.9
|
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 month the Index rose slightly to a value of
72.9. This increase, coupled with last month's jump in help
wanted advertising indicate future job growth. This is also
indicated by an upward tick in the four month moving average.
.
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 January the number of help wanted advertisements increased by 2.8
percent to an Index value of 138.41. The four month moving
average continued to exhibit a slow but steady upward trend.
The
Conference Board's help wanted advertising Index is measure of national
employment expectations. Most regions reported an increase for the
month of January, although the Pacific Coast, including California,
experienced a decline. January is the
third consecutive month of overall growth in the Conference Board's
help wanted advertising Index. Their Index is based
on a survey of 51 major newspapers nation wide.
(www.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 increased 14.3 percent this month, to a value of 79.17. 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, recovering from earlier decline.
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 27.6 percent in January to an Index
value of 78.39. This is down from last month's unusually high
peak. The fourth month moving average, currently at 90.67
resisted last month's peak and remains relatively level.
|
Key Statistics
|
Leading Indicators
|
|
|
% Change From Previous Month
|
| Median
Home Price* |
$270,500
|
Unemployment
Claims |
1.4
|
30
Yr.
Mortgage Rate as of 1/15
|
5.625%
|
Help Wanted
|
2.8
|
| Unemployment
Rate** |
7.0%
|
Building
Permit |
14.3
|
|
|
Manufacturing
Orders
|
-27.6
|
| * 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.
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
medial selling price for a home in Humboldt County also dropped
slightly to $270,500, a decrease of $1,500 from last month's median home
price. This indicates a leveling off of the housing
market, following several months of remarkable growth.
Statewide
home prices as well as sales increased when compared
to the same period last year.
The median home
price in California is $485,700, up 2.3 percent from the previous
month, and up 20.1 percent from January 2004. Despite this
increase, expectations for future housing growth remain modest.
“While we expect sales for all of 2005 to be below 2004’s record level,
demand for housing in California continues to outstrip supply, which is
reflected by the dramatic median price appreciation experienced by
every region in the state,” said C.A.R. Vice President and Chief
Economist Leslie Appleton-Young. “We’re out of the starting gate with a
bang. Both sales and the median price of a home hit new records in
January as homebuyers continued to flood the market,” said C.A.R.
President Jim Hamilton. “Buyers are taking a little more time before
making an offer compared with last year, in part because the specter of
significant increases in mortgage interest rates has diminished.”
(www.car.org)
Nationally,
existing home sales figures were relatively flat, dropping only 0.1
percent from last month's sales. David Lereah, NAR's chief
economist, said January home sales were buoyed by the condo sector. "A
slight decline in single-family home sales was offset by a record
monthly level of condo sales, which just came off its ninth consecutive
record year," he said. (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 February 24th, was 5.69
percent with an average 0.7 points. This is up from last month as
well as from last year at
this time. While sales of existing homes are slightly reduced,
Freddie Mac expects continuingly low interest rates will maintain home
sales overall. “Mortgage rates moved up for the second week in a
row on concerns about a pick up in inflation showing up in raw
materials,” said Frank Nothaft, Freddie Mac vice president and chief
economist. “However, a broader measure of inflation, the Consumer Price
Index (CPI), posted a less than expected rise in inflation, causing
bond yields to fall. This means that next week’s survey results may
retreat to prior levels of a week or two ago.
(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 increased slightly in January, growing 1.3 percent
to an index value of 149.5. This represents an 11.0 percent
increase in retail sales from January of 2004. Overall, the
retail index has consistently grown over time, and is one of the
strongest sectors in the composite Index. Early
tax refunds and a brightening job picture likely contributed to the
rise in retail sales, while some larger chain stores claimed increasing
gas prices hurt sales of larger ticket items like furniture.
Nationwide retail sales, as reported by
The
Commerce Department, decreased in January.
Seasonally adjusted
food and retail sales were $347.7 billion, down 0.3 percent
(±0.7%)
from the previous month but up 7.2 percent (±1.0%) from January
2004. Total sales for the November 2004 through January 2005
period were up 7.6 percent (±0.7%) from the same period one year
ago. (census.gov)
Looking to the future, consumer
confidence dropped slightly after increasing in both December and
January. "“Although expectations cooled this month, consumers are
more optimistic today than they were a year ago,” says Lynn Franco,
Director of The Conference Board’s Consumer Research Center. “Just as
important, consumer confidence about current economic conditions,
including the labor market, continues to gather momentum. Despite
recent fluctuations, both present and future indicators point toward
continued expansion in the months ahead.” The Conference Board's
Consumer Confidence Index is based on a survey of 5,000 representative
United States households. The Index now
stands at 104.0 (1985=100), down from 105.1 in January.
(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 regained some its losses from last month,
increasing 13.9 percent to an Index value of 87.7. This increase
did not compensate for last month's low, although the overall trend in
the hospitality sector has not changed dramatically in the last three
years. This is illustrated by the four month moving average,
which reduces the intensity of this sector's variability.
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.
Gasoline
Prices
Gas prices rose sharply this month in
California and across the United States. According to the
California State Automotive Association, the jump in gasoline prices is
due in part to California oil refineries shifting their production from
winter's need for heating oil to more gasoline for the summer's busy
driving season. Extended cold weather in the Northeast also
placed upward pressure on the price of gasoline as more oil was
demanded for heat. The Organization of Petroleum Exporting
Countries (OPEC) will meet March 16, but representatives say they will
not increase oil production. Expectations that the spike in
prices will not last more than a few weeks make OPEC unlikely to
increase output to match our demand. According to the Energy
Information Administration, the West Coast and California are home to
the highest gas prices in the nation at an average price of $2.123 per
gallon. (www.eia.doe.gov)
Average Price*
(as of 2/15 )
|
Change From Prev. Month
(cents/gal.)
|
| Eureka |
$2.27
|
21¢
|
| Northern CA |
$2.05
|
15¢
|
| California |
$2.09
|
15¢
|
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). |
For more information on local gasoline prices, visit our
Special
Projects page for Dr. Eschker's Study of the Eureka Gasoline
Market.
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.
Electricity consumption for Humboldt County is estimated at 137.33 this
month. Revised consumption data will be available in April.
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 labor report for
January,
the
EDD reported that 55,900 people were employed in Humboldt
County. This
number is down from December's revised figure, indicating a net loss of
1000
jobs.
The total civilian
labor force decreased by 500 people to 60,100. The seasonally
adjusted
total
county employment index rose 1.5 percent despite a net loss of jobs,
and now stands
at 104.5. This is because employment rates surpassed seasonal
expectations.
Nationally, total employment has
increased to a level of 138,682 thousand employed persons over the last
year. The number of unemployed persons dropped 700,000 to 8,444
thousand unemployed persons. (www.bls.gov)
Sectoral
changes in Humboldt County employment:
- Overall the service sector posted a net
loss of 1,200 jobs in January.
- Leisure and Hospitality lost 200 jobs.
- Retail Trade lost 400 jobs.
- Professional and Business Services lost
100 jobs.
- Education and Health Services gained 200
jobs.
- Transportation, Warehousing and Utilities
lost 100 jobs.
- Local government lost 400 jobs.
- State Government lost 100 jobs.
- Other Services lost 100 jobs.
- Overall goods production employment lost
100 jobs in January.
- Construction lost 100 jobs.
- Nondurable Goods Production gained 100
jobs.
- Durable Goods Production lost 100 jobs.
Unemployment rates
increased sharply across the board in January. Humboldt County's
unemployment rate now stands at 7.0 percent, higher than the state and the national
unemployment rates of 6.2 and 5.7
percent, respectively. The increase in the unemployment rate was
likely due to the end of many seasonal retail jobs, as indicated by the
loss of 400 jobs in the retail sector. The unemployment rate is
provided from the Employment Development Department and is not adjusted
for seasonality.
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.
In
January the lumber-manufacturing index decreased 0.4 percent from
last
month's revised figure and now stands
at 104.1.
This is a 30.2 percent increase compared to January of 2004. The
four month moving average increased this month, in part due to last
month's jump in sales, to a value of 94.3.
National economic activity in the
manufacturing
sector, as measured by the Institute of
Supply
Management, grew for the 21st consecutive month in January. The
PMI registered 55.3 percent as of the March 1st report; a number
over 50 indicates growth. "February was another good month in the
manufacturing sector. While the overall rate of growth is slowing, the
overall picture is improving as price increases and shortages are
becoming less of a problem. Exports and imports remain strong. The
recent trend of inventory growth reversed direction during February;
this reduces possible concerns about involuntary inventory build.
Customers' inventories declined slightly, reinforcing the probability
that inventories are not yet a concern," said Norbert J. Ore, C.P.M.,
chair of the Institute for Supply Management. (www.ism.ws.cfm)
The
Bigger Picture
National Economic
News
By: Andrea Walters
On March 3, Federal Reserve chairman Alan Greenspan testified before
the President’s advisory panel on tax reform. The panel, a
bi-partisan mix of professors, advisors, and politicians, was assembled
by President Bush in early January as the first step toward fulfilling
his campaign promise to reform the United States tax system.
Greenspan spoke cautiously, outlining lessons to be learned from the
nation’s last major tax reform under former President Reagan.
Greenspan first acknowledged that periodic tax reform is necessary to
correct the increasing complexity of the U.S. tax system, saying “the
tax code has drifted back to be overly complicated and burdened...A
simpler tax code would reduce the considerable resources devoted to
complying with current tax laws, and the freed-up resources could be
used for more productive purposes. Thus, greater simplicity
would, in and of itself, engender a better use of resources.”
Greenspan also noted that a predictable tax code could be as important
to the economy as price stability.
Mr. Greenspan focused on tax reforms that would be politically viable
and not hinder economic growth. Drawing from the success of
1986’s reform, Greenspan identified several principles to base the tax
reform on. Specifically, Greenspan suggested broadening the tax
base rather than raising the tax rate. To achieve a broader tax
base, Greenspan tentatively proposed the inclusion of a tax based on
consumption rather than income; “Many economists believe that a
consumption tax would be best from the perspective of promoting
economic growth.” He noted that a tax system based on consumption
encourages savings, which will be imperative in the coming years, “As
the baby boom generation begins to retire in a few years, it will
become increasingly important for the nation to boost resources
available in the future through greater national savings.”
The main argument against a consumption tax is that it would unfairly
burden the poor, who have no surplus income for savings or
investment. ‘Taxing’ consumption by providing exemptions for
interest, savings, and investment dividends is unpopular among many
liberals for this reason. Another alternative for a consumption
tax is the creation of a national sales tax which would literally tax
consumption and make saving income cheaper than spending income. By shifting the tax burden from income to consumption the
government could increase the incentive to participate in the labor
force. Canada, for example, has had a federal sales tax since the
mid-1990s.
Finally Greenspan called for a mixed reform, warning that neither
income nor consumption tax would stand alone, especially against public
opinion, “…public views about the fairness of proposed changes to the
tax code will surely play a significant role in the current
debate.” Greenspan also spoke on the ability of an evenly
distributed tax system to unify our bipartisan
government.
| 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 web
site
California Association of Realtors web
site
Dow Jones News Wires web site
Energy Information Administration
web site
Freddie Mac web site
Institute of Supply Management web page
National Association of Realtors
web site
The Conference Board web
site
The Economist web site
The Federal Reserve Board's web
page
The New York Times web site
The Wall Street Journal web
site
U.S. Bureau of the Census's home
page
U.S.
Bureau of the Census's Economic Briefing Room web page
U.S. Bureau of Labor Statistic's web
page
Send us
your comments. Comments will be posted on our Reader
Comments page unless otherwise requested.
