The drop was led by a sharp decrease in consumer confidence and featured moderate declines in building permits, initial claims for unemployment insurance, and local stock prices. These overweighed a big increase in help wanted advertising and a more modest gain in the outlook for the national economy to push the USD Index to its first loss in 27 months.
Although a downturn in the local economy is not imminent, the first drop in the USD Index in more than two years is a cause for concern, according to a press release issued by USD. Economists usually look for three consecutive changes in one direction in a leading index as a signal of a turning point in an economy, so it remains to be seen whether this is a beginning of a trend or simply a one month aberration.
The data on the local economy, particularly the labor market, is mixed. Although the unemployment rate increased in June , wage and salary job growth was solid, especially on a year-over-year basis. Average employment for the first six months of 2011 is up almost 17,000 jobs compared to the same period in 2010. The sectors showing the strongest gains are administrative, support and waste services (+4,650 jobs), leisure and hospitality (+4,500), health care (+4,400), and professional, scientific, and technical services (+4,000). Only construction (-2,000) was down significantly.
After starting the year strongly, residential units authorized by building permits slowed dramatically in the last couple of months. Revised data for May showed that zero multi-family residential units were authorized in the month, the first time ever that no units were authorized in a month. For the first half of the year, total residential units authorized were up more than 38 percent when compared to the first half of 2010. All of that gain came from multi-family units, which were up 115 percent. Single-family units authorized were actually down about 4 percent in the same period.
The labor market variables were mixed in June. Job losses surged, leading initial claims for unemployment insurance to turn negative after five straight positive months. On the positive side, hiring remains solid as help wanted advertising advance for the sixth consecutive month. The net result is that the local unemployment rate rose sharply to 10.4 percent in June from 9.6 percent in May, breaking a modest two-month string where the unemployment rate was below 10 percent.
Consumer confidence continues to fall as gas prices remain relatively high and the labor market shows no sign of improving quickly. This is significant because consumer activity represents two-thirds or more of economic activity.
Local stock prices fell in June along with the rest of the financial markets as investors turned negative on the outlook for the economy.
Despite some weakness in a number of economic variables, the national Index of Leading Economic Indicators was up again in June. Although growth in GDP for the first quarter was slow, it was still positive. The same can be said for national employment growth in May and June, which was positive but very weak.