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Leading Economic Indicators Up in May

Note: The tentative release date for next month's report is July 27.

June 30, 2010 -- The University of San Diego's Index of Leading Economic Indicators for San Diego County rose 0.2 percent in May. The advance was the 14^th in a row for the USD Index and was led by a big surge in building permits. There were also moderate gains in help wanted advertising and the outlook for the national economy, as well as a minor turnaround in local consumer confidence. On the downside, local stock prices were down sharply, and initial claims for unemployment insurance rose, which is a negative for the Index.

	Index of Leading Economic Indicators  The index for San Diego County that includes the components listed below (May)  Source: University of San Diego	+ 0.2 %
	Building Permits  Residential units authorized by building permits in San Diego County (May) Source: Construction Industry Research Board	+ 1.10%
	Unemployment Insurance  Initial claims for unemployment insurance in San Diego County, inverted, estimated  (May)  Source: Employment Development Department	- 0.38%
	Stock Prices  San Diego Stock Exchange Index (May)  Source: San Diego Daily Transcript	- 1.09%
	Consumer Confidence  An index of consumer confidence in San Diego County (May)  Source: San Diego Union-Tribune	+ 0.20%
	Help Wanted Advertising  An index of online help wanted advertising in San Diego (May)  Source: Monster Worldwide	+ 0.81%
	National Economy  Index of Leading Economic Indicators (May)  Source: The Conference Board	+ 0.71%

The outlook for the local economy remains unchanged from recent months: San Diego is likely to have slow to moderate growth for the rest of 2010 and into at least the first half of 2011. One potential problem impacting the recovery is the fiscal problems faced by all levels of government, particularly the huge budget deficit faced by the state of California. Since tax increases have been ruled out, there are likely to be big cuts in state services and employment, especially in education, which is the biggest part of the state budget. While higher education appears to have been spared in the budgets proposed so far, there continues to be pressure on K-12 education. Layoffs there would hurt not only in the short term due to the reduction of consumer spending power, but the long term prospects for the local economy could be impacted as well with a less educated workforce.

Highlights: Residential units authorized by building permits hit their highest level in more than a year (since March 2009) as permit activity picked up in multi-family units. .　. The labor market components continue to be mixed. Initial claims for unemployment insurance were negative for the second month in a row, indicating little relief in terms of job losses. It should be noted that the initial claims data used here involve only claims filed due to job losses as opposed to those filed as part of the extension on benefits passed by Congress. The hiring side of the market continues to firm, with help wanted advertising advancing for the seventh consecutive month. The net result was that the local unemployment rate dropped to 10.0 percent in May from a rate of 10.4 percent in April. . . Local consumer confidence ended a four month downturn with a gain in May, with the raw data for local consumer confidence hitting its highest level since last September. . . Concerns about the strength of the recovery in the national economy and worries about financial difficulties internationally caused weakness in the financial markets that negatively affected local stock prices. . . Revised data for April showed that the national Index of Leading Economic Indicators was unchanged in the month as opposed to the previously reported drop. That means that the national Index has now advanced or been unchanged for 14 straight months. Despite that, there is concern about the strength of the recovery in the national economy. The latest evidence was the work jobs report for May, which came in with a very weak gain of only 41,000 new private sector jobs. For now, the outlook remains positive, but the possibility of a double dip recession remains as unemployment remains high and consumer spending has slowed.

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