Leading Indicators Down in December

Note: A host of problems delayed the release of this report.

February 23, 2001 --The University of San Diego's Index of Leading Economic Indicators for San Diego County fell 0.3 percent in December. The decline was due to big drops in local stock prices and help wanted advertising, along with a more moderate decrease in the outlook for the national economy. On the positive side, there were solid gains in building permits and initial claims for unemployment insurance. Consumer confidence was virtually unchanged, but with a slight positive bias.

	Index of Leading Economic Indicators  The index for San Diego County that includes the components listed below (December)  Source: University of San Diego	- 0.3 %
	Building Permits  Residential units authorized by building permits in San Diego County (December)  Source: Construction Industry Research Board	+ 0.71%
	Unemployment Insurance  Initial claims for unemployment insurance in San Diego County, inverted (December)  Source: Employment Development Department	+ 0.79%
	Stock Prices  San Diego Stock Exchange Index (December)  Source: San Diego Daily Transcript	- 1.83%
	Consumer Confidence  An index of consumer confidence in San Diego County (December)  Source: San Diego Union-Tribune	+ 0.03%
	Help Wanted Advertising  An index of help wanted advertising in the San Diego Union-Tribune (December)  Source: Greater San Diego Chamber of Commerce	- 1.03%
	National Economy  Index of Leading Economic Indicators (December)  Source: The Conference Board	- 0.70%

December’s decline was the sixth consecutive monthly decrease in the USD Index of Leading Economic Indicators. One bit of relatively good news in an otherwise dreary situation was that the magnitude of the drop was not as severe as in some of the recent months. Another positive development was that only three of the components were down in December, the best showing in that regard since the current downturn began. The outlook for the local economy remains the same: The local economy will hit some rough spots in 2001, but it is unlikely that they will be severe enough to be considered a recession.

Highlights: Residential units authorized by building permits surged in December, which is normally a slow month for that component. The total number of residential units authorized in 2000 was down only 3% from the 1999 totals, and there was actually an increase in the number of multi-family units authorized. . . Initial claims for unemployment insurance reached a new seasonally adjusted low for the year in December, just edging below the value recorded in April. That put initial claims at the lowest level since February 1989. . . On the other side of the labor market, help wanted advertising dropped sharply. The implication of this combination of events is slower job growth but little job loss in the local economy. . . The tiny gain in consumer confidence reversed a nine-month downtrend in that component. . . The national Index of Leading Economic Indicators dropped for the third consecutive month, signaling a potential downturn in the national economy. The magnitude of the decline in the national Index in December was the largest in nearly five years.

December's decrease puts the Index of Leading Economic Indicators for San Diego County at 147.0 down from November’s reading of 147.5. Revisions in building permit data for November did not change the level of the Index, but caused the previously reported change to be revised downward to -0.6%. The fluctuations of the Index of Leading Economic Indicators for San Diego County for the last year are given below:

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The Index of Leading Economic Indicators is published by USD’s Real Estate Institute (REI). For more information about the REI, please contact Mark Riedy at (619) 260-4872.