Leading Economic Indicators Down Sharply in August

September 27, 2007 -- The University of San Diego's Index of Leading Economic Indicators for San Diego County fell 1.4 percent in August.  All six components in the Index were down for the month. The way the Index is calibrated, any monthly change higher than one percent is considered a large change.  Using that criteria, there were big drops in initial claims for unemployment insurance, local stock prices, consumer confidence, help wanted advertising, and the outlook for the national economy.  The building permits component performed the best, but was still down moderately. 

Index of Leading Economic Indicators 
The index for San Diego County that includes the components listed below (August) 
Source: University of San Diego 
- 1.4 % 
Building Permits 
Residential units authorized by building permits in San Diego County (August) 
Source: Construction Industry Research Board 
- 0.67% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted (August) 
Source: Employment Development Department 
- 1.30% 
  Stock Prices 
San Diego Stock Exchange Index (August) 
Source: San Diego Daily Transcript 
- 1.14%
Consumer Confidence 
An index of consumer confidence in San Diego County (August) 
Source: San Diego Union-Tribune
- 2.03% 
Help Wanted Advertising 
An index of print and online help wanted advertising in San Diego (August) 
Source: Monster Worldwide, San Diego Union-Tribune
- 2.08% 
National Economy 
Index of Leading Economic Indicators (August) 
Source: The Conference Board 
- 1.27% 

August's drop was the 16th time that the USD Index of Leading Economic Indicators has fallen in the last 17 months.  The last time that all six components were down in a month was in April and May of 2006.  But the magnitudes of the changes back then were not as severe as this month's changes.  The outlook for the local economy continues to be for weakness at least through the first half of 2008.  An outright downturn is not expected, but the possibility of a recession in the local economy is at its highest point in years.

Highlights: The weak housing market impacted each of the components of the Index negatively in August.  After a tiny gain in July, residential units authorized by building permits reverted back to its recent negative trend as developers cut back on construction plans in reaction to the weak housing market.  While both single-family and multi-family permits remain weak, the 211 single-family units authorized in August was the lowest amount since 193 units were authorized in January 1993. . . There was negative news on both sides of the labor market.  Job loss is picking up, as reflected by weakness in initial claims for unemployment insurance.  On the hiring side of the market, help wanted advertising has now fallen for an entire year.  Print advertising is down considerably, and Monster.com reports declines in online advertising in real estate-related sectors and across most white-collar occupational categories.  The net impact was that the local unemployment rate remained at 4.8 percent in August, the same as July and the highest level in three years. . . Local consumer confidence fell to its lowest level since October 2003.  Negative news about problems with subprime loans and foreclosures were the likely cause of the drop. . .  The big declines in stock prices during the summer were finally reflected in the decline in local stock prices in August as investors worried about the financial system being heavily impacted by the weak housing market and the subprime loan problems. . . The national Index of Leading Economic Indicators continued its 2007 pattern of alternating advances with declines the next month.  A positive development was the Federal Reserve following up its recent cut in the discount rate with a cut in the federal funds rate.  It will likely take further cuts in both rates to boost the national economy in the wake of the slump in the housing market. 

August's decrease puts the USD Index of Leading Economic Indicators for San Diego County at 135.0, down from July's revised reading of 137.3.  Revisions in initial claims for unemployment insurance and the national Index of Leading Economic Indicators canceled each other out and led to no change in the previously reported change of -0.3 percent for July.  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
2006 AUG 141.2 -0.6%
SEP 140.9 -0.2%
OCT 140.7 -0.1%
NOV 140.3 -0.3%
DEC 140.0 -0.3%
2007 JAN 139.6 -0.3%
  FEB 139.2 -0.3%
  MAR 139.3 +0.1%
  APR 139.1 -0.1%
  MAY 138.4 -0.5%
  JUN 137.3 -0.8%
  JUL 136.9 -0.3%
  AUG 135.0 -1.4%

Home - All Months

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