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
June 2006
Graphic description: 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 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 May the Index posted a strong performance, gaining 3.3 percent over
last month to a
composite Index value 110.3 (100 = January 1994). The Index was
lifted by surges in the Manufacturing Index and in the Retail Sales
Index. There were also continued declines in the Home Sales
Index. Hospitality was tame, gaining slightly. The
Employment Index was also tame, declining 0.1 percent. Our new
seasonally adjusted Humboldt County unemployment rate was unchanged in
the month of May. Rising interest rates, among other factors
continue to be a drag on real estate markets in Humboldt County, but
also throughout the nation as state, national as well as local markets
all show signs of softening. The real, or inflation-adjusted
median existing home sales price in the County declined over the past
year, the first twelve month period in which this has happened since
2000.
|
Composite & Sectoral Performance,
Index
of
Economic Activity for Humboldt County
|
|
* * *
|
Percent Change From:
|
Index
|
Seasonally Adjusted Index Value (1994=100) |
Previous Month |
Same Month 2005 |
Same Month 2004 |
Same Month 2003 |
Same Month 2002
|
Same Month 2001
|
COMPOSITE
|
110.3
|
3.3
|
1.4
|
1.6
|
4.8
|
3.8
|
-0.4
|
Sector
|
|
|
|
|
|
|
|
|
Home Sales
|
101.6
|
-9.5
|
-25.0
|
-13.2
|
-22.2
|
-22.2
|
-19.2
|
|
Retail Sales
|
146.1
|
13.2
|
6.7
|
-0.5
|
11.5
|
4.2
|
5.5
|
|
Hospitality
|
97.3
|
2.9
|
12.7
|
-0.8
|
8.2
|
7.9
|
-3.6
|
|
Electricity Consumption
|
141.8
|
0.3
|
19.8
|
28.4
|
22.2
|
41.2
|
18.5
|
|
Total County Employment
|
105.6
|
-0.1
|
-1.4
|
2.6
|
3.2
|
3.4
|
1.9
|
|
Manufacturing
|
69.9
|
18.0
|
-13.4
|
-17.4
|
-6.4
|
-20.1
|
-25.4
|
Jump to: Composite
| Leading
Indicators | Individual
Sectors
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 leading indicator increased by 10.9 percent in
May, which may indicate an increase in unemployment in the coming
months. Currently, unemployment in the county is historically low.
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
demonstrate 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. It may suggest future trends in the Humboldt
County labor market. This Index is based on help wanted
advertisements posted in the Eureka
Times
Standard. In May, the Index declined 45 percent to
an Index value of
146.7. This is not an unusual value for this Index historically, and is down slightly from the same period last year. The Index value in March and April of this year was overstated due to data collection inconsistencies, so this month's large drop should not be given much importance.
National
help wanted advertising continued its decline in May according to the
Conference Board. Their Index of help wanted advertising fell to
33, down two points from last month. This is several points off from
the same month a year ago, when it stood at 38. The
Conference Board points out that in the last three months all
nine U.S. regions reported losses. Ken Goldstein, labor economist
at The Conference Board explained that, "Businesses remain cautious
about hiring when near-term economic prospects appear soft. They remain
fundamentally worried about the expense of new hiring (in terms of
wages, as well as health and pension benefits)." (conference-board.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
demonstrate the
overall trend in the data with less monthly volatility.
The
Index of building
permits issued gives insight into future home sales and
construction. In May the Index of building permits rose sharply,
adding ninety percent to its prior level. It now stands at 78.4
which is the highest value for this Index since January of 2005 when it
was 79.2. This is a positive indicator for building and
construction, taken together with the slowdown in real estate it may
indicate that the timing of this construction is not ideal.
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
demonstrate 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 5.1 percent in May and
now stands at 51.2. This is an improvement, but still stands
almost thirty percent below the value of one year ago, and less than
half its value held in November. If current levels are sustained,
it will indicate county manufacturing output in coming months that is
well below historical norms.
|
Key Statistics
|
Leading Indicators
|
|
|
% Change From Previous Month
|
| Median
Home Price* |
$319,000
|
Unemployment
Claims |
10.9
|
30
Yr.
Mortgage Rate
|
--
|
Help Wanted
|
-45.0
|
| Unemployment
Rate** |
5.1%
|
Building
Permit |
90.0
|
|
|
Manufacturing
Orders
|
5.2
|
| * 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. |
| ** Seasonally adjusted from preliminary EDD data. 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.
The big news this month is that the inflation-adjusted price of houses in Humboldt County fell over the last year. For the second month in a row, year-on-year appreciation of houses in Humboldt County was in the single digits. The May 05-May 06 increase was only 3.6%, the lowest increase since July 2000. More importantly, inflation was 4.2% May 2005 to May 2006, meaning that the real prices of houses fell in Humboldt County by about 0.6%. The figure below shows the inflation-adjusted median house price in Humboldt County.
This is what we are starting to see in other parts of the state. The last time inflation-adjusted house prices fell in the county year-on-year was in 2000. Still, the drop in real prices is very small, and as a result did little to encourage sales. Seasonally adjusted sales fell by a whopping 25% from May 2005 to May 2006. The decline in sales and the rapidly growing unsold inventories will put intense downward pressure on prices, and sales will likely remain stagnant until real prices come down.
California's
median existing home sales price, as reported by the California
Association of
Realtors, increased to
$564,430 from $561,750 in April. This is a 0.5 percent increase,
and brings the increase for the past twelve months to 8 percent.
This is a much slower pace than the continual double-digit annual gains
that have been witnessed in prior months. The number of existing
homes sold in the state this month fell again sharply, losing 21.1
percent from May of 2005. (car.org)
According to the National Association of Realtors, at the National
level existing home sales eased 1.2 percent from last month, and are
down 6.6 percent on the year.
The median existing home price is up 3.6 percent over last month at
$230,000. This is a 6.0 percent increase over May of 2005. Housing
inventories also continued to rise, and now stand 5.5 percent over
April at a 6.5 month supply.
The country's largest mortgage company, Freddie Mac, reports that the nationwide
average for a 30-year fixed rate mortgage as of June 29th continued to climb to 6.78
percent with an average 0.5 points.
In the prior month, the rate was 6.67 percent with an average of 0.4
points. A year ago the 30-year fixed mortgage rate averaged 5.53
percent. The current rate is the highest it has been since May of
2002. Frank Nothaft, Freddie Mac vice president and chief economist.explained, “Financial
markets continue to expect more rate hikes by the Fed over the next six
months, which has added upward pressure on mortgage rates,”
(freddiemac.com)
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 surged in May, gaining 13.2 percent to
a seasonally adjusted Index value of 146.1. This is the strongest
performance for this sector in several months and leaves the Index a
healthy 6.7 percent over the
same period last year. This sector has long been a strong
performer, and continues to be a driving factor in the Composite
Index. It is up 46 percent since it began in January of 1994,
making it historically the strongest component in the Composite Index.
The
Federal Reserve Board’s Beige Book
reported on June 14 that at the national level, activity in all
twelve of its districts was expanding with some indication of
deceleration. Our district was among four of the twelve where
activity moderated. Consumer spending was
generally higher than month-ago levels, but the rate of growth
slowed. Activity in service-producing advanced in all districts
that reported on it. While commercial grew, consumer lending
slowed, especially in the area of home equity and mortgage loans.
Energy continued to be a bustling sector, with growth limited chiefly
by shortages of equipment and labor.
(federalreserve.gov)
National
consumer confidence as measured
by the Conference Board increased in June, regaining a single point
after last month's drop to rest at
105.7 from 104.7 in May. A level of 100 is equivalent to the base
year of 1985’s level. Lynn Franco, Director of The Conference Board
Consumer Research Center commented that, "Despite the up-tick,
consumers remain concerned about the short-term outlook. Furthermore,
the Present Situation Index lost ground for the second consecutive
month, a signal that the economy is shifting into lower gear heading
into the second half of this year." The Present Situation Index
is a measure compiled by the Conference Board which tracks consumer's
subjective assessment of current economic conditions. (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
demonstrate the
overall trend in the data with less monthly volatility.
The
hospitality sector increased 2.9 percent in May to an Index value
of 97.3. This represents a 12.7 percent increase from the same
month last year. Together with last month's more sizable gain,
this brings the Index into what is a historically normal range,
although still not a high number. At many times in the past this
Index has ranged above 100, where it began in January of 1994.
Gasoline
Prices
The American Automobile
Association reports that county gas prices have fallen 8 cents as of
June 13, to $3.44, down from the record high of $3.52 set in the previous
month. Eureka continues to be the most expensive community
in the AAA gas price survey for the state. Santa Barbara and South Lake Tahoe were tied for second at $3.40 per gallon.
Prices also fell for Northern California.
The average price per gallon of gas in
Northern California fell 9 cents to $3.23. Both Eureka and
Northern California as a whole are down from their record highs set
last month. This month's prices are the second highest recorded
for both regions, and only the second months on record in which the
average gas price was over three dollars. In the state as a
whole, prices fell also, shedding 12¢
to a price of $3.26 per gallon. In the entire state as well, last
month was a record price and the first month on record in which the
price per gallon exceeded three dollars.
(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 06/13/06)
|
Change From Prev. Month
(cents/gal.)
|
| Eureka |
$3.44
|
-08¢
|
| Northern Ca |
$3.23
|
-09¢
|
| California |
$3.26
|
-12¢
|
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, while not necessarily
indicating a decline in economic activity. Because we
collect our data for this sector quarterly, values are estimated, and
are revised when the quarterly data are received.
The Index value for March
was 137. The May Index value is
estimated to be 141.8. It appears
that increasing energy costs have done little to damp
consumption. The most recent quarter saw percentage increases in the double
digits over the first quarter of all prior years.
Total
County
Employment
The
Index value of the employment sector
is based on seasonally adjusted total employment as reported by the
Employment Development Department. This month we have made a change in
the way we report data in this section. Beginning with this report, all
unemployment rates will be seasonally adjusted, including those for the
state and nation as well as those for Humboldt County. The graph now
displays seasonally adjusted, rather than non-adjusted data. This means
that all recurring seasonal variations have been mathematically removed
from the data so that if a rate rises or falls from month to month it
is not because that rate always rises or falls at this time of year,
but rather because some actual change has occurred.
Preliminary
employment and
labor force data for May indicate 60,400 people in the Humboldt
County labor force, of whom 57,500 are employed. This means
that the labor force remained unchanged in the month.
Additionally, the Humboldt economy created 400 jobs during the month.
This addition was commensurate with the fluctuation that is common
between April and May. The May seasonally adjusted County unemployment rate rose slightly from last month's
level of 5.1 percent to a level of 5.2 percent in May. There are now 3,000
unemployed persons in the county who are actively seeking work.
The employment sector's Index value dropped very slightly, losing 0.1
percent to a value of 105.6. This represents a loss of 1.4
percent from the
same month
last year.
The
national unemployment rate fell in May from a seasonally adjusted 4.7
percent to 4.6 percent. This is a good number, and the best rate
seen since the summer of 2001. California's
unemployment rate rose slightly
to a seasonally adjusted 5 percent, from 4.9 percent last month.
(stats.bls.gov)
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 55 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
demonstrate the
overall trend in the data with less monthly volatility.
In May, lumber based manufacturing rose sharply, increasing
18.0
percent to an Index value of 69.9.
This gain returns the Manufacturing Index to the level it was at near
the end of last year. It is a significant improvement, but still
remains well off from its peak of 104.5 achieved at the end of
2005. This month the Manufacturing Index is the best performing
sector in our report, out pacing even the strong gains in retail sales
to help drive the Composite Index swiftly ahead this month.
At the national
level, the Institute for Supply
Management reports that American manufacturing is still quite
strong.
The Institute observes that although prices continue to rise, the pace
has slowed since
last
month. At the same time, new orders continued to increase and
increased faster than in the previous month. On the downside,
production grew at a slower pace than in the prior month and employment
began to contract. Wood, Wood Products, and Paper were among the
industries in which production grew.
(www.napm.org)
| 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
Federal
Reserve Board Beige Book
Freddie Mac
Institute of Supply Management
National Association of Realtors
U.S. Bureau of the Census's home
page
U.S.
Bureau of the Census's Economic Briefing Room
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