Humboldt Economic IndexJuly 2008Professor Erick Eschker, DirectorCasey O'Neill, Assistant EditorMike Kowtko Jr, Assistant AnalystThis month's report is sponsored by: Redwood Capital Bank The seasonally adjusted composite Index is represented in the graph above by the blue area. The red line shows the four month moving average which attempts to demonstrate the overall trend in the data with less monthly volatility. Composite Index and Overall PerformanceThe Humboldt Economic Index 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. Overall the Economic Index for June 2008 expanded by 3.1% to 106.6. The only industries in the negative were manufacturing and electricity consumption, both taking modest declines when compared to the previous month. Home sales rebounded from May's 23.5% drop to a seasonally adjusted value of 97.97, a 48.9% increase in June 2008. Retail rose 5.8% as consumers feel more confident in future economic stability. Labor markets seem so be at a peak as the Unemployment and Help Wanted fell in June. Things to look forward to is the new Housing and Economic Recovery Act of 2008 and national employment as China slows down production due to the coming Olympic games and current economic situation between China and the United States.
Leading Indicators
The Index tracks 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) expected manufacturing orders. The graphs in this section use a four-month moving average of seasonally adjusted index values in order to demonstrate the overall trend in the data with less monthly volatility.  The seasonally adjusted Index of Unemployment Claims is represented above by the blue area. The red line shows the four month moving average which attempts to demonstrate the overall trend in the data with less monthly volatility. Unemployment claims plummeted in June by 56.9% to its lowest value since inception. This index now stands at 27.3, which could suggest that strength in the coming month for labor markets in Humboldt County.
 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 demonstrate the overall trend in the data with less monthly volatility. Help wanted advertising fell in June by 2.7% to an index value of 96.0, well under the long run average of 135.2. Falling advertisments could suggest a weakening of labor markets in the near future.  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 demonstrate the overall trend in the data with less monthly volatility. Building permits fell in June by 15.7% when compared to last month. As of April, permits have not broken 30 or fell below 25. However, this is a 43.8% drop from last year, which may signal a weakening of future buidling and manufacturing. 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 demonstrate the overall trend in the data with less monthly volatility. Individual SectorsHome SalesThe 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 seasonally adjusted Home
Sales index exploded in June by
48.9% to 97.97. The median home price fell in Humboldt by $5,000 while
the
mortgage rate rose to 6.50, a 0.25 increase from May. When compared to
last
year’s figures the median home price is down $23,000 and the index is
1.0%
higher then June 2007. Homebuyers are waiting for the opportune time to
buy a
home. Housing prices continue to fall and the
supply of
real estate on the market remains high. 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. Also, visit the Humboldt Real Estate Economics Page. Retail SalesThe 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. Retail remains the front runner in the index expanding to a seasonally adjusted value of 160.8 a 5.8% increase from last month. Retail has remained above the 140 mark since July 2006 and averages 142.2 since 2000. The Conference Board reports that consumer confindence rose for the first time since December 2007. This could signal strength in reatil sales in the future as consumers feel more confident about future economic stability. HospitalityThe 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 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 demonstrate the overall trend in the data with less monthly volatility. The Hospitality index remained unchanged from May; standing at an index value of 86.9. This shows a relative strength in local tourist activities. Gasoline PricesThe average price of a gallon of gasoline fell in June as the price of crude oil fell to 125.3 dollars. Eureka and California shed 27 cents this month to $4.52 and $4.32 respectively. Supply of oil is remains tight as world demand remains high. However, with belief that peak oil has occurred or is drawing near the United States will not be constructing any more refineries on the basis that by the time refineries cover their own cost oil will already have run out. The last refinery was built 1976; moreover, there is 149 operating refineries currently in the US, producing roughly 17.4 million barrels. 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.
 Electricity ConsumptionThe 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, while not necessarily indicating a decline in economic activity. Because we collect our data for this sector quarterly, values are frequently estimated, and are revised when the quarterly data are received. We have received second quarter energy numbers. Electricity Consumption slipped 1 percent to an index value of 132.3. The last quarter this index experienced declines from 135.3 in April to 133.7 in May, Energy Prices continue to rise and as a result more people are becoming more energy efficient. On a more recent note the California Public Utilities Commission (CPUC) approved two new renewable energy contracts with Southern California Edison on July 10, 2008. New wind and solar production is expected to produce 96 and 17.7 GWh of energy with the capacity to expand to 185 and 49.7 GWh of energy.
Total County EmploymentThe Index value of the employment sector is based on seasonally adjusted total employment as reported by the Employment Development Department. The seasonally adjusted employment index edged upward form last month, expanding by a mere 0.5% to an index value of 104.9. The unemployment rate rose by 0.1% in June due to a rise in the labor force of six hundred individuals, wile only a third of them acquired jobs. Collapsing help-wanted advertising may keep county employment down throughout July. With the emergence of Humboldt Redwood Company from Pacific Lumber may put some upward pressure on unemployment as the new management hires on only a fraction of Pacific Lumber employees. Internationally, China is starting to feel the pinch of rising oil prices. Factories have started to slow down or shut down as the US economy stabilizes. However, this allows more facilities within the US to begin production as it is more cost effective relative to shipping products in from China.
 Lumber ManufacturingThe 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 55 percent of total county manufacturing employment.  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 demonstrate the overall trend in the data with less monthly volatility. Lumber based manufacturing contracted again in June, falling 6.2% from May. When compared to the same time last year, manufacturing is approximately 28.8% below the June 2007 level. Manufacturing faces hard time as building permits contract and gas prices continue to rise. The Institute of Supply Management reports that manufacturing expanded after four months of contraction. Wood Products on the national level however, contracted in June as well.
Cited References:C.A.R.H.R. 3221 The Institute of Supply Management NAR Send us your comments. Comments will be posted on our Reader Comments page unless otherwise requested. Copyright © 2008 Erick Eschker  |
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