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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2 Comments

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2 responses to “California Economic Update, June 2012

  1. California’s employment picture is even better when one considers that this is an entreprenurial state. The CPS includes the self employed and the gains have been steady and at a higher rate than the U.S. But with median housing prices one can not be quite so optimistic. Around half the homes sold in the state remain distressed sales. What is different is the increased use of short-sales. Realtors claim that a house, even a distressed one, that is being sold by someone living in it shows as a home and brings a higher price, all other things equal, than an empty foreclosed house. That shift alone will raise the median price as well as the average price of homes sold. The annual rate of return to an investment in housing remains negative. So, while we may be out of the woods, it is too early to infer that from the housing data.

  2. I think Mr. Nickelsburg is right, in that short sales are making up a larger percentage of distressed sales. That’s probably because much of the distressed housing in low- and moderate-income neighborhoods has already suffered foreclosure. The housing now in the distressed pipeline is that where (a) the mortgage owed is so far over the present value is so great that there’s no way the homeowner could break even in the foreseeable future, or (b) the household had some assets and has spent them down trying to keep the house. In both cases a short sale may benefit the bank more than a foreclosure.

    But I think that many who argue that the market is still in the tank it was four years ago have unrealistic expectations–that prices will return to the bubble prices of 2005. It was a bubble. There’s not going to be another one any time soon. Prices have returned to trend, except in a few markets like Phoenix and Las Vegas, where they’ve fallen below trend, and that’s where they are going to stay. (Dean Baker noted that prices in Sacramento would fall 56% to return to trend–they’ve fallen 57%.)

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