Leading Economic Indicators Down in December

January 31, 2007 -- The University of San Diego's Index of Leading Economic Indicators for San Diego County fell 0.4 percent in December after falling 0.3 percent in November.  Three components -- initial claims for unemployment insurance, building permits, and help wanted advertising -- were down during the month, with the latter two down sharply.  On the positive side, consumer confidence and the outlook for the national economy were up moderately.  Local stock prices were virtually unchanged, although 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 
- 0.4 % 
Building Permits 
Residential units authorized by building permits in San Diego County (December) 
Source: Construction Industry Research Board 
- 1.66% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted (December) 
Source: Employment Development Department 
- 0.40% 
Stock Prices 
San Diego Stock Exchange Index (December) 
Source: San Diego Daily Transcript 
+ 0.02%
Consumer Confidence 
An index of consumer confidence in San Diego County (December) 
Source: San Diego Union-Tribune
+ 0.82% 
Help Wanted Advertising 
An index of print and online help wanted advertising in San Diego (December) 
Source: Monster Worldwide, San Diego Union-Tribune
- 1.46% 
National Economy 
Index of Leading Economic Indicators (December) 
Source: The Conference Board 
+ 0.56% 

With decreases in November and December, the USD Index of Leading Economic Indicators has now fallen for nine months in a row.  The last four months have seen the same three components B building permits, initial claims for unemployment insurance, and help wanted -- down while the others were up or unchanged.  As mentioned in previous reports, continued weakness in the housing market is likely to negatively impact the local economy and labor market at least through the first half of 2007, with job growth of 12,000 - 15,000 expected for the year.

Highlights: Building permits ended the year on a sour note which left residential units authorized down nearly 30 percent for the year as a whole.  The 10,767 residential units authorized in 2006 was the lowest annual total since 1996.  Most of the damage occurred in the single-family sector, where permits were down 40 percent compared to 2005.  Multi-family permits fared a little better, but were still down roughly 18 percent for the year. . . For the fourth consecutive month, both labor market variables were down.  Initial claims for unemployment insurance were negative for the ninth month in a row, matching the decline in the overall Index.  Help wanted advertising took a particularly hard hit as both print and online advertising dropped in December.  This was the first time that the trend in online advertising has turned negative since Monster.com began releasing the data in May of 2005.  Part of the reason for this is that help wanted advertising is traditionally weak in December and there has not been enough data released yet to seasonally adjust it.  A more fundamental problem was that advertising in the architecture and engineering category was down, probably as a result of the slowdown in housing construction.  Despite this, seasonal hiring dropped the unemployment rate from a low 3.9 percent in November to an even lower 3.7 percent in December. . . Offsetting slightly the weakness in the labor market variables was a modest four month increase in consumer confidence, which continues to be boosted by falling gas prices. . . Local stock prices were relatively flat the last two months despite continued strength in other market averages. . . The national Index of Leading Economic Indicators showed some strength in December.  Initial indications are that the Christmas shopping season went well for retailers.

The decreases in November and December put the USD Index of Leading Economic Indicators for San Diego County at 139.9, down from October's revised reading of 140.7.  Revisions in building permits and the national Index of Leading Economic Indicators caused the previously reported change of -0.1 percent for October to be adjusted downward to -0.2 percent.  A late revision in the national Index for May affected the previously reported values of the local Index from that month on, but not the monthly changes.  The values for the USD Index for the last year are given below:


% Change
DEC 143.0 +0.3%
2006 JAN 143.2 +0.1%
FEB 143.8 +0.4%
MAR 144.2 +0.3%
APR 143.8 -0.3%
MAY 142.7 -0.7%
JUN 142.4 -0.2%
JUL 142.1 -0.2%
AUG 141.3 -0.6%
SEP 141.0 -0.2%
OCT 140.7 -0.1%
NOV 140.4 -0.2%
DEC 139.9 -0.1%

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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