Index of Leading Economic Indicators  The index for San Diego County that includes the components listed below (May)  Source: University of San Diego	- 0.5 %
	Building Permits  Residential units authorized by building permits in San Diego County (May)  Source: Construction Industry Research Board	- 0.83%
	Unemployment Insurance  Initial claims for unemployment insurance in San Diego County, inverted (May)  Source: Employment Development Department	- 1.14%
	Stock Prices  San Diego Stock Exchange Index (May)  Source: San Diego Daily Transcript	+ 0.32%
	Consumer Confidence  An index of consumer confidence in San Diego County (May)  Source: San Diego Union-Tribune	- 1.14%
	Help Wanted Advertising  An index of print and online help wanted advertising in San Diego (May)  Source: Monster Worldwide, San Diego Union-Tribune	- 0.96%
	National Economy  Index of Leading Economic Indicators (May)  Source: The Conference Board	+ 0.57%

With May's drop, the USD Index of Leading Economic Indicators has now fallen in 13 of the last 14 months.  The four negative components in the month overwhelmed the two positive ones to produce the largest monthly drop in the Index since August of last year.  The slump in the housing market has begun to affect other parts of the local economy.  Year-over-year job growth in May was an anemic 4,200, compared to a gain of nearly 18,000 jobs for all of 2006.  May's result was the worst year-over-year job gain since June 2003.  The slowing in job growth in early 2007 was due almost exclusively declines in housing-related industries such as construction, real estate, and lending.  May's data shows that the job losses are accelerating in those areas and are spreading to other sectors as well.  These include previously strong areas such as professional and technical services, personal services, and leisure and hospitality.  While there is still job growth in those sectors, the rate of growth has slowed considerably.  The outlook is that this will continue for the rest of 2007 and into at least the early part of 2008.

Highlights: The slump in construction continues, with residential units authorized by building permits down nine times in the last 10 months. . . Both labor market variables have become decidedly negative.  Job losses have increased significantly, as measured by a surge in initial claims for unemployment insurance.  Hiring also remains weak, with help wanted advertising down for the ninth month in a row.  The net impact was that the local unemployment rate in May rose to 4.2 percent, compared with 3.7 percent one year ago. . . The record high gas prices finally took a toll on local consumer confidence, which dropped sharply after rising for eight consecutive months. . . Despite some turbulence, local stock prices registered a modest gain in May, advancing for the eighth time in nine months. . . The national economic news is mixed.  While there is some concern about the weakness in housing dragging down the economy as a whole, the national Index of Leading Economic Indicators was up for the month, and recent data show that inflation is also a concern.  The latter events reduce the pressure on the Federal Reserve to reduce interest rates, which would have helped the housing market.  I anticipate that a decrease in interest rates will come, but not until 2008 (coincidentally, an election year).                              

May's decrease puts the USD Index of Leading Economic Indicators for San Diego County at 138.3, down from April's revised reading of 139.0.  A revision in March initial claims for unemployment insurance moved the previously reported gain of 0.2 percent to unchanged instead.  Revisions in building permits, initial claims for unemployment insurance, and the outlook for the national economy for April caused the previously reported change of -0.1 percent to be changed to -0.2 percent.  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:

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