Leading Economic Indicators Down Slightly in January

March 15, 2007 -- The University of San Diego's Index of Leading Economic Indicators for San Diego County fell 0.1 percent in January.  Help wanted advertising led the move downward with a sharp drop, and there was also weakness in building permits and initial claims for unemployment insurance.  The biggest news on the upside was a strong increase in consumer confidence.  Local stock prices and the outlook for the national economy were also up, but only slightly so. 

Index of Leading Economic Indicators 
The index for San Diego County that includes the components listed below (January) 
Source: University of San Diego 
- 0.1 % 
Building Permits 
Residential units authorized by building permits in San Diego County (January) 
Source: Construction Industry Research Board 
- 0.73% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted (January) 
Source: Employment Development Department 
- 0.13% 
Stock Prices 
San Diego Stock Exchange Index (January) 
Source: San Diego Daily Transcript 
+ 0.22%
Consumer Confidence 
An index of consumer confidence in San Diego County (January) 
Source: San Diego Union-Tribune
+ 1.20% 
Help Wanted Advertising 
An index of print and online help wanted advertising in San Diego (January) 
Source: Monster Worldwide, San Diego Union-Tribune
- 1.57% 
National Economy 
Index of Leading Economic Indicators (January) 
Source: The Conference Board 
+ 0.28% 

January's drop was the tenth consecutive monthly decrease in the USD Index of Leading Economic Indicators.  As a result, the outlook for the local economy remains weak through at least the first half of 2007.  The slowdown in the housing market is beginning to have a greater and greater negative impact, particularly in terms of job losses.  Employment in construction was down 3,800 in January compared to the some month a year earlier, and real estate-related jobs fell by 2,200.  Other parts of the economy are being impacted as well, e.g., retail employment is down by 2,500 as spending is reduced by job and income losses.  The recent sharp rise in gasoline prices is likely to make the situation worse, with more buying power being siphoned out of the local economy. 

Highlights: Residential units authorized by building permits started 2007 the same way they ended 2006: on the downside.  Permits have now declined for ten months in a row, matching the decline in the overall Index.  One final note from the 2006 permit data: single-family units authorized for the year totaled 4,753, while there were 6,012 multi-family units authorized.  This was the first time since 1990 that the number of multi-family units authorized exceeded the number of single-family units authorized. . . Both labor market variables continue to exhibit weakness.  Initial claims for unemployment insurance were up for the tenth month in a row, which is a negative for the Index and a sign that job losses are edging up slightly.  The hiring side of the market was even worse, with help wanted advertising taking a plunge to open the year.  Online advertising showed big drops in areas of recent strength, including leisure and hospitality, healthcare, and retailing.  As are result, the local unemployment rate edged up to 4.3 percent from 4.1 percent in January 2006, and job growth slowed to a gain of slightly more than 13,000 jobs, compared with an average of nearly 18,000 for 2006 as a whole. . . Despite some relatively bad news, local consumer confidence continues to surge.  That component has now been up for five months in a row.  It will be interesting to see how it might be affected by the recent rise in gasoline prices, as past data shows a roughly 70 percent negative correlation between consumer confidence and gas prices. . . Local stock prices started the year up nicely before dropping dramatically in recent weeks. . . The national Index of Leading Economic Indicators edged up slightly in January.  Preliminary estimates put GDP growth at an anemic 2.2 percent in the fourth quarter, which is actually up from the 2.0 percent growth registered in the third quarter. 

The decrease in January puts the USD Index of Leading Economic Indicators for San Diego County at 139.8, down from December's revised reading of 140.0.  Revisions in building permits and the national Index of Leading Economic Indicators affected the previously reported values of the Index and changes from August 2006 onward, although none of the revisions were significant.  Please visit the Website address given below to see the revised changes for the individual components of the Index.  The values for the USD Index for the last year are given below:


% Change
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 141.2 -0.6%
SEP 140.9 -0.2%
OCT 140.7 -0.1%
NOV 140.3 -0.3%
DEC 140.0 -0.3%
2007 JAN 139.8 -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