Leading Economic Indicators (September - December 2002)

March 13, 2003 – Problems with the timely receipt of data have prevented the release of the University of San Diego’s Index of Leading Economic Indicators for San Diego County since October of 2002.  This report updates the Index through the end of 2002.  More timely reports will be released as the data becomes available.

With declines in each month from September to December of 2002, the USD Index of Leading Economic Indicators has fallen for nine months in a row.  As a result, the outlook for the local economy remains negative in the short term.  While a decrease in economic activity is unlikely (see below), any growth in the economy of San Diego is likely to be sluggish in the year ahead.  Job growth for 2003 is projected in the 10,000 – 15,000 range, up slightly from the 9,500 jobs gained in 2002, which was the smallest number of jobs gained in the region since 1994.  Without strong job growth, the local unemployment rate will remain higher than in recent years, in the 4.0 – 4.5% range.

The USD Index of Leading Economic Indicators is published under the auspices of the School of Business Administration's Real Estate Institute. For more information about the Institute, please visit its Website at http://realestate.sandiego.edu
    September October November December
Index of Leading Economic Indicators 
The index for San Diego County that includes the components listed below
Source: University of San Diego
- 0.9% - 0.9% - 0.3% - 0.5%
Building Permits 
Residential units authorized by building permits in San Diego County 
Source: Construction Industry Research Board 
- 0.20%  0.21%  1.34%  0.55%
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted  
Source: Employment Development Department
- 1.29% - 1.13%  0.27%  1.21%
Stock Prices 
San Diego Stock Exchange Index
Source: San Diego Daily Transcript 
- 0.66% - 0.46%  1.41%  0.06%
Consumer Confidence 
An index of consumer confidence in San Diego County
Source: San Diego Union-Tribune
- 2.05% - 3.79% - 4.85% - 3.84%
Help Wanted Advertising 
An index of help wanted advertising in the San Diego Union-Tribune  
Source: Greater San Diego Chamber of Commerce 
- 0.22% - 0.79% - 1.07% - 1.13%
National Economy 
Index of Leading Economic Indicators
Source: The Conference Board 
- 0.82%  0.33%  0.98%  0.16%

Although nine consecutive monthly declines in a leading economic indicators index would normally signal an upcoming recession, the structure of the San Diego economy protects it somewhat from the normal swings of the national business cycle.  There are not a lot of companies locally that manufacture cyclical products such as automobiles, appliances, and steel which would be adversely affected by inventory buildup and subsequent layoffs during a downturn in the business cycle.  Also, because there are not a lot of big corporate headquarters here, the region is less affected by the mass layoffs that often occur in middle management during difficult economic times.  Thus, a “recession” in San Diego might be defined as positive but slower economic growth as opposed to strong growth during good economic times.  It would probably take a strong outside shock, such as a prolonged military conflict or terrorist activity, for there to be an actual decline in the local economy.

 Highlights:  The drop in consumer confidence continues to be the main drag on the Index.  Consumer confidence has fallen for six straight months, including sharp drops in the last five months.  Fears about the state of the economy and about the impending conflict with Iraq are the main contributors to this falloff in consumer sentiment.  This is a serious development since consumer spending represents two-thirds of economic activity. . . The labor market components remain mixed.  Initial claims for unemployment insurance have stabilized after rising sharply in the spring and summer of 2002 and have actually dropped in the last couple of months, which is a positive for the Index.  On the other side of the labor market, help wanted advertising has dropped four months in row.  Thus, while the rate of job loss has slowed recently, firms are not doing much hiring. . . An encouraging note is many of the components have turned positive in recent months.  Building permits, local stock prices, and the outlook for the national economy were all up in the closing months of 2002.  In fact, four of the six components of the Index were positive in December, with only a sharp drop in consumer confidence tilting the Index to the negative side.

 The values for the Index of Leading Economic Indicators for San Diego County for the last year are given below:

    Index   % Change
2001 DEC 137.3 +0.4%
2002 JAN 137.8 +0.3%
  FEB 138.2 +0.3%
  MAR 138.8 +0.5%
  APR 138.5 -0.2%
  MAY 138.3 -0.2%
  JUN 137.5 -0.5%
  JUL 136.5 -0.7%
  AUG 135.6 -0.7%
SEP 134.4 -0.9%
OCT 133.1 -0.9%
NOV 132.7 -0.3%
DEC 132.1 -0.5%

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: (619) 260-4883 

FAX: (858) 484-5304 

E-mail: agin@san.rr.com