INDEX OF ECONOMIC ACTIVITY
FOR
HUMBOLDT COUNTY
Assistant
District Attorney Tim Stoen is interviewed in the Local Spotlight
section
Professor
Erick Eschker, Director
Jessica Digiambattista, Assistant Editor
Garrett Perks, Assistant Analyst
This month's
report
is sponsored by
Coast Central Credit Union
March 2004
Graphic description: The seasonally adjusted composite Index
is represented in the graph above by the blue area. The red line shows
a 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 has not been feeling the impact of the national level
economic recovery. We have not seen
economic growth yet, in 2004. February's composite
Index declined 2.4 percent, and now stands at 105.0. Virtually all
sectors of the Index declined this month. The estimated electricity
consumption index showed a meager 0.5 percent increase. However, other
sectors are down. Home sales took another big hit this month. After
losing ground last month, the home sales index dropped again. The 13.8
percent decline leaves the index standing at 115.9. The retail sector
experienced it's third consecutive monthly decline. The retail sales
index decreased 3.7 percent from last month's value, and now stands at
129.8. The hospitality sector index decreased 1.8 percent to
87.2. Employment also declined, even though many people left the
job market. The employment index dropped 0.7 percent to 104.6.
Manufacturing posted another loss this month. The lumber-based
manufacturing index declined 0.8 percent to 83.6
|
Composite & Sectoral Performance,
Index
of
Economic Activity for Humboldt County
|
|
* * *
|
Percent Change From:
|
Index
|
Seasonally Adjusted Index Value (1994=100) |
Previous Month |
Same Month 2002 |
Same Month 2001 |
Same Month 2000 |
Same Month 1999 |
Same Month 1998 |
COMPOSITE
|
105.0
|
-2.4
|
-3.0
|
-1.0
|
-3.8
|
-6.5
|
-5.3
|
Sector
|
|
|
|
|
|
|
|
|
Home Sales
|
115.9
|
-13.8
|
-21.0
|
-6.0
|
-11.2
|
-14.1
|
11.3
|
|
Retail Sales
|
129.8
|
-3.7
|
-7.7
|
-2.9
|
-6.4
|
-9.1
|
1.1
|
|
Hospitality
|
87.2
|
-1.8
|
8.3
|
-2.4
|
-9.3
|
-0.8
|
-6.8
|
|
Electricity Consumption
|
111.1
|
0.5
|
-5.3
|
0.5
|
-0.7
|
-13.6
|
--
|
|
Total County Employment
|
104.6
|
-0.7
|
-0.4
|
2.2
|
1.3
|
0.7
|
-0.7
|
|
Manufacturing
|
83.6
|
-0.8
|
4.9
|
-5.8
|
-9.0
|
-17.3
|
-27.1
|
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 help-wanted advertisements in the Eureka Times-Standard,
(2) number of
claims for unemployment insurance, and (3) number of building permits
issued. 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.
The Help Wanted leading indicator is not available for this month.
The index of claims
for unemployment insurance is an indicator of negative economic
activity. In February, the total number of new claims for
unemployment insurance fell. The seasonally adjusted moving average
also fell. Though the unemployment rate jumped during the last two
months, a reduction in new claims may indicate better labor market
conditions in the future.
Home
Sales Economic Indicator:
The index of building
permits issued gives insight to future home sales and construction.
While the total number of building permits issued remained the same in
February, the seasonally adjusted moving average for this indicator
fell. Since there is a lag time between the issuance of a permit
and construction or sale of a home this months decline in the indicator
may indicate lower home sales later in the year.
|
Key Statistics
|
Leading Indicators
|
|
|
% Change From Previous Month
|
| Median
Home Price* |
$225,000
|
Help Wanted
Advertising |
-
|
30 Yr.
Mortgage Rate as of 12/31
|
5.652%
|
Building
Permits |
-9.1%
|
| Unemployment
Rate** |
7.0%
|
Unemployment
Claims |
-13.5%
|
| * 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.
Despite the low interest rates, and the strong state and national
housing markets, local home sales are down. The seasonally adjusted
home sales index dropped 13.8 percent to 115.9. Just two months ago the
home sales index was at 144.16, one of the highest levels ever. Now,
only two months later the index is down more than 28 percentage-points.
This is the lowest level for the home sales index since November
2001.
The
median home price in Humboldt County shot upward, after falling below
the $200,000 level in January. A median priced home in Humboldt
County cost $225,000 in February. Statewide
home prices leveled off, but remain historically high. The median home
price in California dipped back below $400,000, but not by much.
February's median home price declined 2.9 percent from last month's
revised figure, to stand at $394,300.
"While demand for housing gives no indication of slowing down, the
inventory of homes for sale continues to decline," said C.A.R.
President Ann Pettijohn. "This dynamic is a key constraint in the
housing market and why we're experiencing such dramatic price
appreciation." (www.car.org) Nationwide
home sales increased 2.0 percent in February, with the median price of
an
existing home dropping to $168,700. David
Lereah, NAR's chief economist, said the housing market could defy
expectations this year. "Currently, we are projecting that home sales
will decline slightly, but they remain at exceptionally high levels,"
Lereah said. "With a strong underlying demand for housing from a
growing population in a recovering economy, we could be flirting with
another record this year."
(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 April 1st, was 5.52
percent with an average 0.6 point. “In
advance of what is hoped will be a strong jobs report tomorrow, bond
yields rose this week and, predictably, so did mortgage rates,” said
Frank Nothaft, Freddie Mac chief economist. “The economy has been
conducive to job gains for several months, but we have yet to see any
significant rise in employment. “But even with rates slightly higher,
the housing industry will continue to be an active, solid sector of the
economy going into the spring buying season. We don’t foresee any major
slowdown in the housing market this year. Quite the contrary, we are
confident 2004 will be another banner year for home sales.”
(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 first quarter of 2004 has been a rocky one for local retailers,
with retail
sales dropping for the second consecutive month. The index for this
sector declined 3.7 percent in February, and now stands at 129.8.
Nationwide retail sales, as reported by
The
Commerce Department, edged upward in February. Seasonally adjusted
sales were $327.2 billion, an increase of 0.6 percent (±0.8%)
from the previous month and up 7.9 percent (±1.0%) from February
2003. The increase was led by building material and garden equipment
suppliers which increased 14.7 percent from February 2003. Electronics
and appliance stores also posted gains, with a 12.3 percent increase in
sales over February 2003.
The
Conference Board's Consumer Confidence Index stagnated in March. The
measure, which now stands at 88.3,
is down 0.2 percentage points from the previous month's revised number.
“While consumers claimed business conditions were more
favorable in March than last month, they also claimed jobs were less
readily available," says Lynn Franco, Director of The Conference
Board’s Consumer Research
Center. "The labor
market not only continues to dampen
consumers’ present-day spirits, but it is also making them less
optimistic about the short-term outlook.”
(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.
The
hospitality sector decreased slightly in February. The seasonally
adjusted index value for this sector dropped 1.8 percent to 87.2.
Gasoline
Prices
The price of gasoline is on the rise,
locally and throughout the nation. "One of the reasons California has
such high gas prices is because demand is regularly higher than
available supply," said AAA of Northern California spokeswoman Jenny
Mack. "Reducing consumption could eventually result in lower prices.
It's a way for consumers to exercise some control as prices skyrocket."
(www.csaa.com)
Average Price*
(as of 3/16)
|
Change From Prev. Month
(cents/gal.)
|
| Eureka |
$2.18
|
24¢
|
| Northern CA |
$2.14
|
25¢
|
| California |
$2.16
|
26¢
|
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.
In
March the estimated electricity consumption index rose 0.5 percent to
111.1
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 November,
the
EDD reported that 56,200 people were employed in Humboldt County. This
is down from January's revised figure, indicating a net loss of 200
jobs. The total civilian
labor force decreased by 500 people to 60,400. The seasonally adjusted
total
county employment index fell in February by 0.7 percent, and now stands
at 104.6.
Sectoral
changes in Humboldt County employment:
- The service sector continued to lose jobs
in February. General merchandise and miscellaneous retail each lost 100
jobs. Employment in educational and health services also declined by
100 jobs. Along with a loss of 200 jobs in food services.
- Government employment was mostly stable
except for a decrease of 100 state education jobs.
- Employment in wood product manufacturing
and employment in construction each increased by 100 jobs.
- Employment in the agricultural sector did not change.
February's
unemployment rate declined somewhat, but still remains above the state
and national rates. This is the second straight month that the
county unemployment rate is above the state rate. The decline can
be attributed to a decrease in the
size of the labor force, rather than an increase in total
employment.
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.
The
lumber-manufacturing industry had little change this month. The index
for this sector declined 0.8 percent to 83.6.
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.
National
manufacturing output, as measured by the Institute of
Supply
Management, grew modestly in March. The ISM
Index
level rose 1.1 percentage points to register 62.5 percent in March (a
number
higher than 50 indicates growth). "The first quarter was very strong
for the manufacturing sector and the economy overall. Our survey
respondents generally indicate that business is quite 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
Revised
U.S. Gross
Domestic Product (GDP) figures were released on March 25th by the
Bureau of Economic Analysis. The GDP growth rate was revised upward slightly to 4.1
percent for the fourth quarter of 2003. Real GDP growth for the
third
quarter of 2003 was 8.2 percent. The major contributors to the increase
in real GDP in the fourth quarter were personal consumption
expenditures, exports, equipment and software, private inventory
investment, and residential fixed investment. Imports, which are
a subtraction in the calculation of GDP, increased. (www.bea.gov)
Many economists have been trying to explain America's jobless economic
recovery. Though some March employment figures may signal a turnaround
in the poor labor market conditions, one economist has another
explanation. Jan Hatzius, an economist at Goldman Sachs is arguing that
the weak labor market is linked to a weak economic recovery. He claims
that the GDP statistics which show strong economic growth may be wrong.
For evidence of this, Hatzius points to a divergence in the growth
rates of GDP in the
industrial production sector and the goods sector. During the past two
years, the goods sector has reported significantly higher GDP growth
than the industrial production sector. The problem with this is that
the data for
the goods sector is estimated, while the data for the industrial
production sector comes directly from industry reports. It is possible,
Hatzius claims, that the GDP growth rate in the industrial production
sector is a more
accurate reflection of the total GDP growth rate. If this is the case,
then current GDP statistics may be overstating the economic recovery.
Another
piece of evidence that GDP is being overstated can be found in
data on aggregate income. GDP which is the measure of aggregate
expenditures
in our national economy should in theory be equal to aggregate
income. However, aggregate income data shows a 2.8 percent rate of
growth
since the end of 2001. This figure stands in contrast to the 3.6
percent growth rate indicated by the GDP data. (www.economist.com)
State Economic News
Citizens of Inglewood, a Los Angeles suburb, said
no thanks to an offer put on their local ballot by Wal-Mart
Corporation. Last
year the Inglewood City Council blocked a proposal by Wal-Mart to build
a shopping center with a Wal-Mart Supercenter and other stores. After
being denied by the City Council, Wal-Mart collected over 10,000
signatures and organized a ballot initiative for the proposal. In
the vote on April 6th, citizens voted down Wal-Mart's offer, with 65.7
percent voting against the measure, and only 34.2 voting in favor.
According to campaign-finance records, Wal-Mart spent over $1 million
on the Inglewood campaign. Opponents of the measure are hailing the
vote as a victory against corporate giants.
(www.cnn.com)
Local Spotlight
Economic and Social Costs of Economic Crimes
By: Jessica Digiambattista, Assistant Editor
In the wake of recent white-collar scandals involving high profile
people and businesses, more attention is being
focused on the impact and seriousness of economic crimes. Though they
don't result in bloodshed or violent mayhem, these crimes cause serious
harm to the victims, and society at large. Assistant District Attorney,
and economic crimes prosecutor, Tim Stoen defines an economic crime as
"a violation of law that results in an economic loss to somebody." The
loss however, is not merely financial. "It harms the spirit that's
required for a democracy to function," says Stoen. Economic crimes can
break down the social capital, and the trust needed for the marketplace
to function properly. Social capital can be defined as the
institutions, relationships, and trust that shape the quality and
functioning of a society. Stoen suggests, the
community divide resulting from the District Attorney's case
against the Pacific Lumber Company represents a degradation of our
social capital.
Ultimately
economic crimes can result in the loss of jobs
and the stifling of economic growth. According to Stoen,
prosecuting
these crimes is necessary to keep the economic system "viable and
respected." A fair and just environment is necessary for our economy to
flourish. Individuals, small businesses, and large corporations can all
be victims or perpetrators of an economic crime. Prosecuting and
hopefully preventing these crimes is important for the livelihoods of
all people.
A
specific area of concern for local consumers has been the higher than
average cost
of gasoline in Humboldt County. When asked about this Stoen said that
the issue had been examined under the previous District Attorney. At
that time there was insufficient evidence to prove collusion among
local retailers. Due to the isolated nature of the retail gasoline
market in Humboldt County, competition is limited. The lack of
competition could lead to local retailers being able to command a
higher price at the pump. According to Stoen the only recourse against
this type of legal price increase "would be consumers refusing to buy,
or bringing in competitors like Costco." It is interesting to note that
when
Costco began selling gasoline in the area, prices declined
significantly.
There
are many types of economic crimes and many ways in which the victims
and society bear the costs. Whether it taps our individual pocketbooks
or segregates our community, we all feel the effects. An
important element in combating the costs of economic crimes is
maintaining and fostering our social capital. The
diversity of ideas in our community is an asset necessary to having a
vibrant economy. Though we all have different values and livelihoods,
we also have common ground.
The trust, honesty, partnerships, and friendships which exist in our
community can be damaged, and no dollar value can be placed on the loss
of these.
| 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 green 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 (the blue line in the diagram
above)
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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