Leading Economic Indicators Down Sharply in January

Note: The tentative release date for next month's report is March 26.

February 26, 2009 -- The University of San Diego's Index of Leading Economic Indicators for San Diego County fell 2.0 percent in January. Sharp declines in building permits, initial claims for unemployment insurance, consumer confidence, and help wanted advertising overwhelmed solid gains in local stock prices and the outlook for the national economy to push the USD Index down for the 33rd time in 34 months. The way the Index is calibrated, a change of one percent or more in a month is considered a very significant change. January’s drop marked the fourth consecutive month with a drop of two percent or more, and those four months represent the four largest drops ever in the Index.

Index of Leading Economic Indicators 
The index for San Diego County that includes the components listed below (January) 
Source: University of San Diego 
- 2.0 % 
Building Permits 
Residential units authorized by building permits in San Diego County (January) 
Source: Construction Industry Research Board 
- 4.06% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted, estimated  (January) 
Source: Employment Development Department 
- 3.66% 
Stock Prices 
San Diego Stock Exchange Index (January) 
Source: San Diego Daily Transcript 
+ 1.23%
Consumer Confidence 
An index of consumer confidence in San Diego County (January) 
Source: San Diego Union-Tribune
- 3.07% 
  Help Wanted Advertising 
An index of online help wanted advertising in San Diego (January) 
Source: Monster Worldwide
- 3.53% 
National Economy 
Index of Leading Economic Indicators (January) 
Source: The Conference Board 

The outlook for the local economy remains bleak at this point. The length and the depth of the decline in the USD Index suggests that San Diego’s economy may remain weak through the end of 2009. There is no sign of any imminent turnaround at this point. Whether the recently passed federal stimulus package will be enough to stabilize the local economy remains to be seen. It should help some, as will the efforts to help homeowners avoid foreclosure. The final element that is needed is stability in the financial system to the extent that credit will start flowing again.

Highlights The weakness in construction carried into 2009 as residential units authorized by building permits fell below 100 in a month for the first time ever in January. There were only 82 single-family units authorized during the month, and multi-family units totaled a minuscule six units. Residential units authorized were at an all-time low of 5,155 units in 2008, and that record could be threatened in 2009. . . The outlook for the labor market remains grim. Initial claims for unemployment insurance topped 30,000 for the first time ever in January. By comparison, only about 10,000 initial claims were filed each month at the height of the boom in the local economy. There is no help on the hiring front, as help wanted advertising fell for the 29th straight month. As of this writing, the local employment and unemployment numbers for January have not been released. But the unemployment rate is expected to approach 8 percent. This follows a year in which San Diego County lost 5,100 jobs, which was only the fifth time in the last 30 years where employment has dropped year-over-year. . . A big drag on the local economy is that local consumer confidence continues to sink. As consumers become more concerned about their futures, they cut back on their expenditures, which threatens to make a bad situation even worse. . . After losing more than a third of their value in 2008, local stock prices rebounded significantly in January. . . The national Index of Leading Economic Indicators has now been up for two months in a row. Could this signal a turnaround for the national economy? Economists usually look for three consecutive changes in a leading index as a signal of a turning point. This may be forecasting a bottom in the national in the second half of 2009, as many economists are expecting.

January’s decrease puts the USD Index of Leading Economic Indicators for San Diego County at 106.0, down from December’s revised reading of 108.2. Revised data for building permits and the national Index of Leading Economic Indicators caused a revision in the values of the USD Index for November and December and the previously reported change for November. 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
2008 JAN 126.1 -1.6%
  FEB 124.4 -1.4%
  MAR 122.7 -1.4%
  APR 121.1 -1.3%
  MAY 119.8 -1.1%
  JUN 118.6 -1.0%
  JUL 117.2 -1.3%
  AUG 116.3 -0.8%
  SEP 115.4 -0.8%
  OCT 112.8 -2.2%
  NOV 110.6 -2.0%
  DEC 108.2 -2.1%
2009 JAN 106.0 -2.0%

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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