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County leading economic indicators unchanged in August

The USD Burnham-Moores Center for Real Estate's Index of Leading Economic Indicators for San Diego County was unchanged at 121. 7 in August. A strong increase in building permits and a more moderate gain in help wanted advertising offset small declines in initial claims for unemployment insurance, local stock prices, consumer confidence, and the outlook for the national economy to produce the unchanged result. Due to revisions in previously reported data, the USD Index has now been unchanged in two of the last three months.

Those two flat months, plus the fact that more components were down than up, raises some potential issues about the local economy, according to Alan Gin, USD economics professor who compiles the index. Right now, those issues are minor, and it would take more negative data in the months ahead before a red flag is raised. For now, the outlook remains positive.

More than 30,000 wage and salary jobs were added to the local economy in August compared to August 2011, the third consecutive month with strong year-over-year gains. Despite problems with its economy and the business environment, California is leading the nation in terms of the total number of jobs created in the last few months. San Diego is both contributing to and benefiting from that result, as an expanding state economy means more orders for San Diego companies and more visitors to the region.

Strength in both single-family and multifamily units authorized help push residential units authorized by building permits to a sixth consecutive gain. The 223 single-family units authorized in August was second this year only to July's results, which in turn was the highest level since December 2010. Combined with solid numbers on the multifamily side, total residential units authorized were at the third highest level for the year.

For the third month in a row, the labor market variables moved in opposite directions. Job losses continue to edge up, resulting in more initial claims for unemployment insurance, which is a negative for the Index. Hiring continues to pick up, with help wanted advertising advancing for the 20th month in a row. The net result was that the local unemployment rate fell to 9.0 percent in August, down from a revised 9.3 percent in July. After adjusting for seasonality, the local unemployment rate is at its lowest level since January 2009.

Consumer confidence was negative in August, the first time in nine months that that component declined. This is a potential area of concern, as consumer activity is typically more than 70 percent of economic activity.

Sentiment in the financial markets was also negative, as local stock prices dropped for the third time in four months.

The trend of the national Index of Leading Economic Indicators alternating between positive and negative continued for a sixth straight month. The latest national economic data reflect these mixed results. The third estimate for Gross Domestic Product for the second quarter showed an annualized growth rate of 1.5 percent, which was down from the second estimate of 1.5 percent. At the same time, the new benchmark for payroll employment showed an extra 386,000 jobs created in recent years compared to what was initially reported.

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