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County leading indicators up in November

The USD Burnham-Moores Center for Real Estate's Index of Leading Economic Indicators for San Diego County rose 0.3 percent to 110.3 in November.

Leading the way to the upside were big gains in the outlook for the national economy and initial claims for unemployment insurance. There were smaller increases in local stock prices and consumer confidence. These outweighed another sharp drop in building permits and a small decrease in help wanted advertising to help break a string of three straight months where the USD Index was unchanged.

November's gain marked the 20th consecutive month where the USD Index has either increased or remained unchanged, according to USD professor Alan Gin, who compiles the index. The outlook then remains unchanged from that of recent months: Slow to moderate growth is expected in the local economy for at least most of 2011.

A key development occurred in the local labor market in November, when nonfarm wage and salary employment increased by 100 jobs compared to the same month in 2009. While the gain was tiny, it was the first time since the downturn began in April 2008 that the year-over-year employment comparison was positive. The forecast for 2010 is for a gain of 10,000 to 15,000 jobs, with health care, business and professional services, leisure and hospitality, and construction to be the biggest gainers (the latter from very depressed levels). Manufacturing and government are the sectors to remain under the most pressure.

The trend in residential units authorized by building permits remains negative. Residential units authorized will be up this year compared to last, but will still be the second lowest on record. Permits in 2011 are expected to be up significantly to about 4,500 to 5,000 for the year. This will partly be due to firmness in the housing market, where prices are expected to increase 5 to 7 percent as employment rebounds.

After a month in which both components were positive for the first time since March, the labor market variables turned mixed again in November. Initial claims for unemployment insurance fell below 20,000 in a month for the first time since September 2008. The hiring side of the market was weak though, with help wanted advertising dropping for the first time in a year. The net result was that the local unemployment rate rose to 10.4 percent in November. This is up from 10.3 percent in October due to more people looking for work.

Local consumer confidence edged up for the seventh straight month. Except for July, though, most of those increases have been relatively small, indicating that consumers are optimistic, but only cautiously so. As mentioned previously, it will take significant improvement in the labor market and the unemployment rate before consumer confidence really begins to surge.

Local stock prices were up again in November, as investors remained positive about the prospects for San Diego-base companies.

The news for the national economy remains positive, with the national Index of Leading Economic Indicators up for the fifth straight month. Like the local economy, growth nationally is expected to be slow to moderate, with GDP growth in the range of 3 to 3.5 percent in 2011. While better than in recent quarters, the growth will not be enough to generate a large number of jobs. As a result, the national unemployment rate is likely to remain in the high 8 percent range.

November's increase puts the USD Index of Leading Economic Indicators for San Diego County at 110.3, up from October's reading of 110.0. Although the data for building permits and the national Index of Leading Economic Indicators were revised for October, there was no change to the previously reported values for the USD Index or the changes for that month.

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