California Economic Update, March 2012

 The Department of Finance released its March 2012 Finance Bulletin which includes the following review of the latest economic indicators for California.

ECONOMIC UPDATE

For the California economy, 2012 got off to a slow start.  Employment indicators were contradictory—a small loss of nonfarm jobs, but the unemployment rate improved.  Construction activity slowed, as did the real estate market.

LABOR MARKET CONDITIONS

The labor market report for January was mixed, but was basically positive news.  The unemployment rate dropped.  Nonfarm employment fell, but if you look at the details underneath the headline number, the picture looks better.

California nonfarm payrolls fell by 5,200 jobs in January—the first month-over loss after five consecutive job-gains totaling 185,500.

On the other hand, private payrolls grew by 2,600.  The government sector suffered an unusually large drop in federal employment and a loss in local government (mainly local education) employment.   Private sector job growth accelerated over the last several months, adding 21,700 jobs per month on average since June 2011.

Six major industry sectors gained jobs and five lost.  The largest gains were in trade, transportation, and utilities (14,400), driven by a very large gain in retail trade employment.  Other gains in January included construction (8,900), professional and business services (7,500), leisure and hospitality (2,400), manufacturing (1,700), and mining and logging (500).

January’s losses were led by an unusually large 22,900-job decline in information—the largest one-month drop on a record dating back to 1990.  Other losses in January included government (7,800), educational and health services (7,300), other services (1,500), and financial activities (1,100).

California’s unemployment rate fell 0.3-percentage point to 10.9 percent in January—the first time the rate has been below 11.0 percent since April 2009.  The rate fell by 1.2 percentage points over the year.  The January rate was 1.5 percentage points lower than its recessionary high of 12.4 percent in July-October 2010.

In January, the number of employed Californians rose by 27,800 (and by 307,200 over the year).  The number of unemployed Californians fell by 40,600 (by 203,200 over the year).

BUILDING ACTIVITY

Home building slowed sharply in January, with the pace of permitting falling 24 percent from December—the second consecutive month-over-month slowdown.  In January, residential permits were issued at a seasonally adjusted annual rate of 40,230 units, down over 23 percent from a year earlier.

Single-family permits were down 18.2 percent, while multi-family permitting was down 29 percent.

Nonresidential building slowed slightly from December, but was up over 2 percent on a year-over-year basis.

For the four months ending with January 2012, nonresidential permitting grew over 21 percent from the same months a year earlier.  Nearly half of this growth came from alterations and additions.

REAL ESTATE

Residential real estate conditions softened at the beginning of 2012.  Sales of existing, single-family detached homes in January totaled 517,740 units at a seasonally adjusted annualized rate in January, slowing 5.7 percent from January 2011.

The median price of existing, single-family homes sold in January slid to $268,280, down 3.9 percent from a year earlier, due to an a increase in distressed home sales,

California’s unsold inventory index ratcheted up to 5.5 months in January, from 4.1 months in December 2011.  Likewise, the median number of days needed to sell a home rose to 61.9 days, up nearly 3 days from December.

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