The gain was led by a strong positive move for initial claims for unemployment insurance, along with smaller gains for consumer confidence and help-wanted advertising. These outweighed moderate declines in building permits, local stock prices and the outlook for the national economy to push the USD Index to its 11th increase in the last 13 months, according to USD economics professor Alan Gin, who compiles the index.
While November's gain was small, it was still positive, so the outlook for the local economy remains for positive growth in 2013. One potential concern was partially dealt with when the outgoing Congress reduced the impact of the "fiscal cliff" by making permanent the income tax rate cuts for the vast majority of taxpayers. However, the 2 percent reduction in the payroll tax was not extended, which would particularly affect low- and middle-income workers who tend to spend a very high portion of their take-home pay.
Not dealt with was the sequestration of funds for domestic and defense programs, which could have a big impact on the local economy, given the high level of defense manufacturing and research in San Diego. Also affected could be the large amount of scientific research and development that goes on in the region, Gin said in his report.
Residential units authorized by building permits dropped for the first time in nine months as construction plans slowed considerably in November, which is statistically the lowest month of the year for building permits. However, there was a decline even after the data were seasonally adjusted.
Both labor market variables were up during the month. In total numbers, initial claims for unemployment insurance fell to their lowest level since March 2008, a sign that the rate of job loss decreased significantly during the month. On the hiring front, help-wanted advertising returned to the positive side after a small decrease in October broke a string of 21 consecutive advances in that component. The net result was that the local unemployment rate fell to 8.3 percent in November, down from an 8.6 percent rate in October.
The trend in consumer confidence continues to be positive, although the raw data for the component was actually down. The USD Index uses a moving average to smooth the erratic month-to-month fluctuations in some of the components, which resulted in a positive reading for consumer confidence. While consumer activity post-Thanksgiving looked encouraging, retail sales were sluggish later on in the Christmas buying season.
November was a down month for all the market averages, and local stock prices were no exception.
The outlook for the national economy remains mixed as the national Index of Leading Economic Indicators fell after previously registering back-to-back gains for the first time since the beginning of the year. One positive macroeconomic note was that the third estimate for gross domestic product growth for the third quarter came in at 3.1 percent compared to 2.0 percent in the "advance" estimate and 2.7 percent in the second estimate.