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County leading economic indicators up in July

The USD Burnham-Moores Center for Real Estate's Index of Leading Economic Indicators for San Diego County rose 0.3 percent in July to 121.7, up from a revised value of 121.3 in June.

The gain was led by moderate gains in building permits, help wanted advertising, and the outlook for the national economy. There were smaller advances in local stock prices and consumer confidence. The only negative component was initial claims for unemployment insurance, which were moderately negative.

July's advance was the ninth in a row for the USD Index. Although the gains in the last two months were modest, the outlook remains for continued solid growth in the local economy, at least into the first half of 2013.

Last month's report pointed to strong local job growth in June, and July's numbers were even better. Nonfarm wage and salary employment increased by 35,100 compared to July 2011, the best year-over-year comparison since December 2000. The sectors experiencing the biggest year-over-year gains were administrative and waste services (+7,000), leisure and hospitality (+6,000), government (+5,700), retail (+5,200), and health care (+5,200). Even the beleaguered construction sector showed a gain of 2,200 jobs. Barring a national or international catastrophe, 2012 is shaping up to be the best year for job growth in San Diego County since 2006, and that strength will carry over into 2013.

July's increase in residential units authorized by building permits was fueled by a surge in single-family permits. In July, 263 single-family units were authorized, the most since 277 were authorized in December 2010. This is likely due to firming in the single-family market, as evidenced by the median price reaching a four-year high according to DataQuick. If this trend continues, it has significant ramifications for the local economy, as more people are employed in the building of a single-family unit than in the building of a multifamily one.

The labor market variables remain mixed. Initial claims for unemployment insurance were negative for the second month in a row, while help-wanted advertising was up for the 19th consecutive month. The net result was that the local unemployment rate was at 9.2 percent in July, down from a revised 9.3 percent in June. The situation was even better given that July is usually the worst month of the year for the unemployment rate.

Consumer confidence was up for the eighth straight month, althought July's gain was the smallest in the streak.

Local stock prices turned up after a couple of down months, but have been in a narrow trading range since March.

The national Index of Leading Economic Indicators has been on a roller coaster, alternating between positive and negative for the last five months. The national outlook remains for positive but weak economy growth for the rest of 2012. This is epitomized by the second estimate of second quarter gross domestic product. While the second estimate of a 1.7 percent annualized growth rate for the second quarter is higher than the "advance" estimate of 1.5 percent, the growth rate is still really weak with a reading below 2.0 percent.

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