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County's leading economic indicators up

The University of San Diego Burnham-Moores Center for Real Estate's Index of Leading Economic Indicators for San Diego County rose in each month of the second quarter, with gains of 0.6, 0.7 and 0.1 percent respectively for April, May and June.

June's slight advance was led by a sharp increase in building permits along with moderate gains in consumer confidence and help wanted advertising. These outweighed moderate declines in local stock prices and the outlook for the national economy to push the USD index to its eighth consecutive monthly increase, albeit by the slimmest of margins.

Although June's advance was weak and the up/down ratio of the components was the worst in nine months, the outlook remains for positive growth in the local economy. The most encouraging news for the local economy was a solid jobs report for June. San Diego County added 24,000 more jobs in June compared to the same month in 2011. That was the best year-over-year job growth since 2005. Barring an international event that tips the national economy into a double-dip recession, that job growth is expected to last the rest of the year and into at least the first half of 2013.

After a slow first quarter, residential units authorized by building permits picked up in the last few months to push into positive territory for the year overall. Residential units authorized are up 4 percent through the end of the first half compared to the same period in 2011. The trend continues to be weakness in single-family units authorized and strength in multifamily, with the former down 23 percent and the latter up 26 percent through the end of the second quarter.

The labor market variables were mixed in June. Initial claims for unemployment insurance have mirrored the rise at the national level, which signals an increase in job loss and which is a negative for the index. On the other hand, hiring continues to improve, with help wanted advertising increasing for the 18th month in a row and now at its highest level since September 2008. The net result was that the local unemployment rate was at 9.2 percent in June, which compares to a rate of 8.8 percent in May and 10.4 percent in June 2011. The increase in June was largely due to seasonal factors. Seasonally adjusted, the unemployment rate fell below 9 percent for the first time since March 2009.

Despite weak numbers on the economy, consumer confidence continues to improve. The drop in gas prices heading into the summer likely improved the outlook for consumers.

Despite declining in both May and June, local stock prices finished the first half of the year up 12.2 percent. This compares to gains of 5.4 percent in the Dow Jones Industrial Average, 8.3 percent in the S&P 500 Index and 12.7 percent in the Nasdaq Composite Index.

The national Index of Leading Economic Indicators declined in two of the three months in the second quarter. Growth remains positive but weak, with the "advance" estimate for Gross Domestic Product for the second quarter showing a 1.5 percent annualized growth rate, which was down from an already weak 2.0 percent growth rate for the first quarter.

June's increase puts the USD Index of Leading Economic Indicators for San Diego County at 121.4, up from 121.3 in May and 120.5 in April.

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