By Dennis MeyersThe Department of Finance released its February 2012 Finance Bulletin which includes the following review of the latest economic indicators for California.
Most economic readings for the final months of 2011 indicate that the economy shrugged off the midyear slowdown and that the recovery may have become self-sustaining. Labor markets made steady progress. Real estate markets improved slightly. Construction activity accelerated modestly, but remained very subdued.
LABOR MARKET CONDITIONS
- California’s labor market definitely picked up the pace in the closing months of 2011. In the four months ending with December, nonfarm employment rose 112,300 versus gaining only 25,800 in the preceding four months. The unemployment rate dropped a full percentage point during the final four months, compared to rising 0.3 percentage point in the preceding four months.
- The employment report for December 2011 contained good news across the board. Nonfarm jobs grew 10,700—the fifth consecutive month-over-month gain. November’s gain was revised up to 24,700—an 18,200-job improvement from originally reported 6,500 gain.
- The unemployment rate tumbled 0.2 percentage point to 11.1 percent—the lowest rate since April 2009. In December, the number of Californians employed rose 73,000, unemployment dropped 37,000, and the labor force grew by 37,000.
- Looking at the industry employment trends; five industries gained jobs and six lost. The best gain in December was in professional and business services (13,400) and followed by construction (4,800) and then information (3,600), government (1,500) (mainly local education—state government payrolls dropped 1,300), and education and health services (600).
- The biggest loss in December was in trade, transportation and utilities (4,200)—likely due to post-holiday draw downs in retail trade and delivery services. Employment also fell in leisure and hospitality (3,400), manufacturing (2,500), other services (1,900), mining and logging 600), and financial activities (600).
- The employment estimates for 2007 through 2011 will change on March 9 following the annual benchmark revision process. The month-to-month pattern evident in the most recent months will still be evident, but the employment levels will be different.
- Even though it faltered in December, home building activity followed a moderately—but volatile—rising trend during 2011. Despite this trend, home building remained at a relatively subdued level.
- Residential permits were issued at a seasonally adjusted annual rate of 51,813 units in December, down almost 19 percent from November. Single-family permits were down 12 percent, while multi-family permitting was down 23 percent.
- New home permitting during the 2011 as a whole was up 5 percent from 2010, but was down a substantial 78 percent from the prerecession peak in 2004.
- Similarly, after slowing sharply in 2008, nonresidential construction also gradually improved throughout 2011. Nonresidential permitting rose 18 percent in December from a year earlier. For 2011 as a whole, the pace of nonresidential permitting accelerated 16.3 percent from 2010. This gain was broad based with slowdowns in only two sectors, amusement parks and service stations.
- Existing home markets firmed up slightly in the last two months of 2011, with modest improvement in prices and sales. However, both measures were still softer than a year earlier. Sales of existing, single-family detached homes in December totaled 520,940 units at a seasonally adjusted annualized rate, off nearly 7 percent from the pace set at the end of 2010. The median price of existing, single-family homes sold was $285,920, down 6.2 percent from a year earlier.
- The inventory picture was mixed in December. The unsold inventory index slipped to 4.2 months—the lowest level since December 2009. Conversely, the median number of days needed to sell a home rose to 59 days, up slightly from a year earlier.