Monthly Archives: June 2012

California Economic Update, June 2012

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

 Economic Update

California gained jobs in May­ — a very positive development in light of the job loss first reported for April.  In May, the state added 33,900 jobs and April’s initially reported loss of 4,200 jobs was revised up to a gain of 1,300 jobs—a 5,500-job swing.  The state is still in the midst of a slow, steady recovery with modest employment growth.  The state continued to add jobs in its high-paying specialties.

Labor Market Conditions

Industry job gains in May were led by the leisure and hospitality sector, which added 13,200 jobs.  This includes the accommodation and food service subsector, which, based on resurgent tourism and business travel, has essentially recovered all of the jobs lost during the recession.

In May, professional and business services posted strong job gains—adding 10,500 jobs and rising 4.1 percent over the year.  The high-wage professional, scientific & technical services subsector again led this growth, and in April was the first private industry subsector to regain all of the jobs lost during the recession.

Even though financial activities has been recovering slowly—rising 1,100 in May—job growth in its real estate rental and leasing subsector has been accelerating, reflecting recent improvements in real estate activity driven by investor activity and rising demand and supply of rental properties.

Other job gains in May included education and health services (10,500), manufacturing (3,000), construction (2,600), information (1,000), and mining and logging (200).  Only three industry sectors lost jobs in May.  Government dropped 3,300 jobs, as did trade, transportation and utilities.   Other Services lost 1,600 jobs.

California’s private sector is leading the recovery in employment.  Private employment during the first five months of 2012 was up 1.9 percent over the same months of 2011, while government employment dropped 1.8 percent.

The state’s unemployment rate dropped to 10.8 percent in May, with employment growth outpacing labor force growth.   The number of employed Californians rose 25,000—the eleventh consecutive increase—and the number of unemployed fell 12,500.

Real Estate

Real estate markets may have begun a turnaround.  In May, California home prices posted their third consecutive year-over-year gain and the statewide median price rose above $300,000 for the first time since October 2010. The pace of existing home sales in May was the strongest since February 2009.

Sales of existing, single-family detached homes totaled 572,260 units at a seasonally adjusted annualized rate in May, a 21.5 percent increase from a year earlier.  The median price of existing, single-family homes sold in May was $312,110, up 6.6 percent from a year earlier.

Inventory measures also improved dramatically in May. The unsold inventory index fell to 3.5 months, the lowest inventory reading since December 2005.  The median number of days needed to sell a home also fell to 46.6 days, a 10.4 percent improvement from a year earlier.

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California’s European Exposure

According to Milken Institute research, California is significantly less exposed to potential fallout from a European recession than many other states.

  • A 10% decline in U.S. exports to the European Union would only slow GDP growth by 0.2%
  • Utah and South Carolina are the most vulnerable states with exports to the European Union equaling  4.2% and 3.5% of their state GDPs respectively.
  • South Carolina’s has significant auto production connections to the European Union.
  • Europe is a significant importer of Utah gold.
  • Made-in-California exports to the European Union comprise only 16% of the state’s total exports and equal less than 1.5% of its GDP.
  • California exports could also be affected indirectly if European financial disruptions slowed growth of BRIC economies.t

(Read the article)

The Golden State is more sensitive to North American and Pacific Rim economies.

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Unemployment History Map

The Sacramento Bee published a great interactive map by Mitchell Brooks and Philip Reese that chronicles the history of California county unemployment rates from 2008 through May 2012.  You can pick specific months or hit the PLAY button and watch the whole disappointing episode play out.

The disparity between coastal and inland regions is quite obvious.  Also, playing the graphic makes it clear which areas suffer from perennially high unemployment rates—Imperial, Merced, Colusa.  At peak unemployment in January 2010, only nine counties posted unemployment rates below 11% and five counties breached 21%..

(View the map)

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Ripple Effects for California

In a great front-page-above-the-fold article, Slowing U.S. economy has ripple effect in California  (Sacramento Bee, June 2), Dale Kasler provides a well rounded perspective on the implications of the disappointing May national job numbers for California and the Sacramento area.  Weak job growth at the national level is primarily associated with economic troubles abroad—principally Europe and China.  This likely explains a “flattening out of the export trade from California.”

Another recession is not likely, though, given that the state is still benefiting from a robust high tech sectors and a housing market that at long last may be turning around—even in the Sacramento area.

  • “The U.S. slowdown is likely to take some of the edge off California’s job growth…”
  • “One of California’s top-performing sectors, exports, is already seeing the effects of the troubles engulfing China, Europe, Brazil and other key trading partners.”
  • “Despite problems at the national level, [Sung Won] Sohn said California should benefit from the booming technology sector and the fledgling recovery in the housing market – two of its most vital industries.”

However, the outlook for the state’s Capital region is mixed.  While it is still hamstrung by state budget issues, it is also showing signs of improvement in the real estate,

  • “Prices of single-family homes have risen in Sacramento County for four straight months,…”
  • “There are 100 fewer Sacramentans holding payroll jobs than a year ago…”

(Read the article)

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