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County leading economic indicators up in October

The USD Burnham-Moores Center for Real Estate's Index of Leading Economic Indicators for San Diego County rose 0.3 percent to 122.6 in October, up from September's value of 122.3.

Three of the components -- building permits, consumer confidence and the outlook for the national economy -- were up moderately during the month. The other three components -- initial claims for unemployment insurance, local stock prices and help-wanted advertising -- were virtually unchanged for the month, with the latter two only slightly negative. October's increase was the 10th gain in the last 12 months, with one of the other two months being a decline and the other being unchanged.

October's modest gain, with none of the components advancing significantly and with three being unchanged as indicate above, epitomizes the current state of the economy, according to USD economics professor Alan Gin, who compiles the index.

The outlook is for more of the same, although the local economy is expected to pick up some in 2013. Job growth for the coming year is expected to be in the 25,000 to 30,000 range, which will drive the local unemployment rate to below 8 percent. The sectors gaining the most jobs are the same ones that are doing well in 2012, namely professional and business services, health care and leisure and hospitality. A surprising sector will be construction, where employment this year was up for the first time since the peak in June of 2006. The sector should do even better in 2013, as housing prices are expected to increase by high single digits.

Residential units authorized by building permits continue to lead the USD index to the upside, having now increased for eight months in a row. In each of the last six months, residential units authorized have been the top gainer (or near the top) in the index. As a comparison, there were 157 single-family units and 345 multifamily units authorized in October, versus 111 single-family and 62 multifamily units authorized in October 2011.

Both of the labor market variables were basically unchanged for the month. Initial claims for unemployment insurance was exactly unchanged, while help-wanted advertising was down only slightly. That slight loss though was the first for help-wanted advertising in nearly two years (since December 2010). The net result was that the local unemployment rate rose to 8.6 percent in October, up from a revised 8.5 percent in September.

Consumer confidence increased for the 10th time in 11 months in October. The initial reports for the Christmas buying season were positive, with strong sales both in stores on "Black Friday" and online as well.

Local stock prices traded in a very narrow range in October and ended the month down slightly.

The national Index of Leading Economic Indicators registered back-to-back gains for the first time since the beginning of the year. Although there are some worries about the global economy and the looming "fiscal cliff," the news on the national economy has been generally positive, although not spectacular. The national unemployment rate remained below 8 percent for the second straight month, although it is expected to rise in November due to the effects of Hurricane Sandy. Another positive was that the second estimate for third quarter gross domestic product showed the national economy growing at a 2.7 percent annualized rate, which was up from the "advance" estimate of 2.0 percent reported last month, which in turn was higher than what most economists expected.

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