San Diego's economic indicators on upward track for 25th month in a row
By Dean Calbreath
Rising home construction and an improving job market helped brighten the outlook for the local economy, according to the latest index of leading economic indicators from the University of San Diego.
It was the 25th month in a row that the index has either risen or remained unchanged, following three years of steady decline. In April, only one of the seven factors that comprise the index was negative: the national outlook, which slowed in the first quarter due to rising gas prices and government cutbacks.
Alan Gin, who compiles the index for USD's Burnham-Moores Real Estate Institute, said he expects the local economy to continue to grow through 2011, although the waters remain choppy.
"Local employment is increasing, but the increase is slow when compared to the job losses the local economy suffered during the downturn," he said.
He also noted that even though housing prices are still above their 2009 lows, they have fallen for three months in a row according to the S&P/Case-Shiller Home Price Index, "despite the fact that interest rates are at historic lows, employment is picking up, and new home inventory is low due to low single-family home construction."
Both locally and nationwide, the Case-Shiller index indicates that the housing market is now in a double-dip downturn.
Here's how the local indicators performed last month.
- Home construction. Despite the dip in prices, home construction has been picking up in San Diego County since the beginning of the year. Through the first four months of 2011, building permits for residential units were nearly double what they were in the same period in 2010, which was one of the worst years on record. Although single-family units are still down for this period, multi-family units are now nearly five times the level of last year. That reverses the trend in 2010, when the annual total of single-family units authorized was twice as high as multi-family units.
- Unemployment. First-time jobless claims dipped sharply last month, helping push the unemployment rate from 10.2 percent in March to 9.8 percent in April - the first time since May 2009 that it has been below 10 percent. But much of that change is due to seasonal hiring as employers ramp up for summer tourism. After adjusting for such seasonal fluctuations, the jobless rate probably edged down only slightly, from 10.2 percent in March to 10.1 percent in April, says Lynn Reaser, economist at Point Loma Nazarene University. On the other hand, the jobless rate has been dropping for four months in a row, signaling an improving labor market.
- Hiring. At the same time that the jobless rate has come down, help wanted advertising has been rising. The Monster Employment Index for San Diego County - which tracks on-line job postings - has moved up for four months in a row and is now at its highest point since November 2008.
- Optimism. Consumer confidence in the Pacific region remains positive despite high gas prices, and has now been up for a full year, according to a regional poll by The Conference Board in New York. "This is significant given the large role that consumer spending plays in the local economy," Gin said.
- Stock prices. After falling in March, local stock prices resumed their advance in April and have now been up in eight of the last nine months. But so far in May, the index for Nasdaq - where most local companies are listed - has slipped 1.5 percent, which means that even though it has been on a recent upswing local stocks may end up slightly down for the month.
The USD findings were echoed in a quarterly index of Southern California economic indicators maintained by California State University in Fullerton.
The Fullerton index, which has been moving steadily upward for a year and a half, rose by 1.27 percent in the first quarter - the first time it has increased by more than 1 percent since the spring of 2004.
Fullerton economist Adrian Fleissig, who compiles the index, says that it indicates an increase in economic activity in Southern California in the next three to six months.
Fleissig said that five of his seven indicators were positive: consumer confidence, hiring, unemployment, stock prices and interest rates. The two negatives came from a drop in the money supply and declining home construction permits, which have been dipping in some areas of Southern California even though they are on the rise in San Diego County.
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