California Economic Update, April 2012

The Department of Finance released its April2012 Finance Bulletin which includes the following review of the latest economic indicators for California.

ECONOMIC UPDATE

California continued to experience a very measured recovery.  Employment growth continued in the first two months of 2012, but at a much slower pace than at the end of 2011.  The pace of homebuilding during January and February was erratic and subdued, but was improved from a year earlier.

LABOR MARKET CONDITIONS

In February, labor markets continued to make progress, but at an extremely gradual pace.  Nonfarm employment expanded modestly and the originally reported job loss in January was revised to a small gain.  The unemployment rate held steady.

The pace of job growth during the first two months of 2012 was much weaker than during the last few months of 2011—just 2,800 per month on average in January and February compared to 37,100 per month on average during August through December 2011.  The unusually warm winter weather likely impacted construction, retail trade, and leisure and hospitality employment.

California nonfarm payrolls grew by 4,000 jobs in February.  The originally reported 5,200-job loss in January was revised to a 1,500-job gain—a 6,700-job swing.

Four industries gained jobs, one held steady, and six lost.  The largest gain was in information, which added 9,300 jobs following an unusual 23,200 loss in January.  Other sectors that added jobs include manufacturing (6,200), education and health services (6,100), and professional and business services (2,800).

The largest losses were in government (10,300) led by a sizable drop in local government employment (6,700).  Other sectors that lost jobs include trade, transportation, and utilities (5,800), other services (2,300), construction (900), financial activities (600), and mining and logging (500).  There was no change in leisure and hospitality employment.

Nonfarm payroll employment rose by 127,300, or 0.9 percent, from February 2011 to February 2012.

Employment rose 67,700 in professional and business services; 46,800 in trade, transportation, and utilities; 39,800 in educational and health services; 19,300 in leisure and hospitality; 4,300 in manufacturing; 3,500 in information; 2,300 in construction; and 500 in financial activities.   There was no change in mining and logging employment.

Over the year, employment fell by 49,800 in government; and 7,100 in other services.

After falling in each of the five previous months, California’s unemployment rate held steady at 10.9 percent in February.

BUILDING ACTIVITY

As of April 2012, the Construction Industry Research Board (CIRB) ceased operation.  At this point, residential construction data published by the Bureau of the Census will be used to evaluate California residential construction trends.

During the first two months of 2012, home building was whipsawed by on again-off again multifamily permitting.  After slowing dramatically in January, residential construction permitting rebounded in February.  According to not seasonally adjusted data, permitting of multifamily units dropped over 80 percent in January and then reversed course, rising nearly 200 percent in February.   Over the course of both January and February, residential permitting increased over 15 percent from the same months of 2011.

REAL ESTATE

The news for California residential real estate markets was mixed in February.  Home prices remained weak, but sales improved modestly.  Inventory measures improved as well.

Looking at the first two months of 2012 together, existing home sales were essentially unchanged from the same months of 2011, while the median price was down 2.8 percent.

In February, the unsold inventory index inched down to 5.3 months.  The median number of days needed to sell a home dropped to 58.9 days, down 9 percent from a year earlier.

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