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County leading economic indicators unchanged in October

The USD Burnham-Moores Center for Real Estate's Index of Leading Economic Indicators for San Diego County was unchanged at 110.0 in October, despite the fact that five of the six components in the index were positive during the month.

The outlook for the national economy was up sharply, initial claims for unemployment insurance and local stock prices were moderately positive, and consumer confidence and help wanted advertising also increased, but just barely. These gains were offset by a huge drop in building permits to leave the USD Index unchanged for the third straight month, according to a report issued by USD professor Alan Gin.

There was some initial concern when last month's report showed the first drop in the USD Index in 18 months. But that decline was revised upward to unchanged, so no turning point to the downside has been signaled.

The outlook remains for slow but positive growth for the local economy at least through the first half of 2011.

One area that has been improving has been the labor market. While the news is still bad, with the unemployment rate above 10 percent now for 17 straight months, the situation is relatively better than during the depths of the downturn. In October, non-farm wage and salary employment was down 1,100 from October 2009, which was the best year-over-year comparison since April 2008. With hints of a stronger holiday buying season, it is likely that the year-over-year comparison will turn positive in November and December for the first time since the Great Recession began.

Residential units authorized by building permits fell to their lowest level of 2010 in October. For the year as a whole, single-family permits are still holding up but multi-family units are down slightly through October compared to the same period in 2009.

The labor market components were both positive for the first time since March of this year. The pace of job loss slowed, with initial claims for unemployment insurance hitting the lowest level of the year, both in absolute and in seasonally adjusted terms. The hiring side of the market was virtually unchanged, although slightly positive, with help wanted advertising increasing for the 12th consecutive month. The net result was that the local unemployment rate dropped to 10.2 percent in October, which is down from the 10.6 percent rate of September.

Local consumer confidence remains volatile on a month-to-month basis, with the actual value of the index down for October compared to September. But when the volatility is smoothed out using a moving average, the trend is still slightly positive.

After slumping in the late spring and early summer, local stock prices advanced for a third straight month, following the rally in the broader financial markets. .

The national index of leading economic indicators turned in a second strong advance and has now been up four months in a row. The "second" estimate for the gross domestic product (GDP) for the third quarter showed growth at a 2.5 percent annualized rate, up from the 1.7 growth rate of the second quarter and the fifth consecutive quarter of positive GDP growth.

October's unchanged reading puts the USD Index of Leading Economic Indicators for San Diego County at 110.0, the same as September's revised level. A big upward revision in the national Index of Leading Economic Indicators caused the change in September to be revised upward to unchanged from the previously reported drop of 0.1 percent.

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