Leading Economic Indicators Down Sharply in May

Note: The tentative date for the release of next month's report is July 29.

June 26, 2008 -- The University of San Diego's Index of Leading Economic Indicators for San Diego County fell 1.1 percent in May.  For the sixth consecutive month, the leader on the downside was a sharp drop in consumer confidence.  Initial claims for unemployment insurance and help wanted advertising were also down considerably.  Three components - - building permits, local stock prices, and the outlook for the national economy - -  were positive, but only slightly so.  With May's decline, the USD Index has now fallen in 25 of the last 26 months, and it has declined significantly for eight straight months.

Index of Leading Economic Indicators 
The index for San Diego County that includes the components listed below (May) 
Source: University of San Diego 
- 1.1 % 
Building Permits 
Residential units authorized by building permits in San Diego County (May) 
Source: Construction Industry Research Board 
+ 0.06% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted (May) 
Source: Employment Development Department 
- 0.82% 
Stock Prices 
San Diego Stock Exchange Index (May) 
Source: San Diego Daily Transcript 
Consumer Confidence 
An index of consumer confidence in San Diego County (May) 
Source: San Diego Union-Tribune
- 4.79% 
Help Wanted Advertising 
An index of online help wanted advertising in San Diego (May) 
Source: Monster Worldwide
- 1.22% 
National Economy 
Index of Leading Economic Indicators (May) 
Source: The Conference Board 

There is no sign of any change in the negative outlook for the local economy for the near future, with the slump now likely to extend through the first half of 2009.  The labor market is looking particularly weak at this point.  For the second time in three months, job growth in May was down on a year-over-year basis.  Employment growth for 2008 as a whole through May is now just barely positive with a gain of only 400 jobs compared to the same period in 2007.  Barring a huge surge in jobs in June, employment growth for 2008 as a whole will probably turn negative when the next employment report is released.  How long the job losses continue and how deep they will be is uncertain at this point.

Highlights: Residential units authorized by building permits turned positive in May after being down in each of the first four months of the year.  Although they are still down considerably for the year and are at levels not seen since the 1960s, building permits have rebounded a little from the 16-year low reached in March. . . Both sides of the labor market continue to be under pressure.  Job losses remain at an elevated level, as indicated by a rise in initial claims for unemployment insurance.  At the same time, hiring plans continue to be slow, with help wanted advertising now being down for 21 consecutive months.  The net result was that the local unemployment rate jumped to 5.5 percent in May, its highest level since July 2003. . . Although the raw data on local consumer confidence showed an increase from April to May, the trend continues to be sharply negative.  A moving average of the seasonally adjusted data is used to determine the overall trend by filtering out random monthly fluctuations. . . Local stock prices advanced for the third consecutive month, although those gains will be erased due to the heavy losses in the financial markets in June. . . Data for the national economy remains mixed.  Although employment at the national level has fallen in each of the first five months of 2008, the growth rate of GDP was revised upward to 0.9 percent for the first quarter.  The national Index of Leading Economic Indicators has now risen or been unchanged for the last three months.

May's decrease puts the USD Index of Leading Economic Indicators for San Diego County at 119.7, down from April's revised reading of 120.9.  In a statistical oddity, a revision of the national Index of Leading Economic Indicator for March had no impact on that month or the previously reported change for April, but did impact the overall level of the local Index for April.  Please visit the Website address given below to see the revised changes for the individual components.  The values for the USD Index for the last year are given below:


% Change
2007 MAY 138.4 -0.5%
  JUN 137.3 -0.8%
  JUL 136.8 -0.4%
  AUG 134.6 -1.6%
  SEP 133.5 -0.8%
  OCT 131.7 -1.4%
  NOV 129.4 -1.8%
  DEC 128.1 -1.0%
2008 JAN 126.1 -1.6%
  FEB 124.4 -1.4%
  MAR 122.7 -1.4%
  APR 120.9 -1.4%
  MAY 119.7 -1.1%

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For more information on the University of San Diego's Index of Leading Economic Indicators, please contact:

Professor Alan Gin 
School of Business Administration 
University of San Diego 
5998 Alcalá Park 
San Diego, CA 92110 
TEL: (858) 603-3873 

FAX: (858) 484-5304 

E-mail: agin@san.rr.com