INTRODUCTION
These monthly reports are designed to augment the East Bay Quarterly Forecast by providing snapshot information about key indicators on a monthly basis. While the Quarterly Forecast will provide the expert analysis of the national, state and regional economists at the UCLA Anderson Forecast, the Monthly Report is prepared by EDAB staff with the intent of keeping you current on economic trends and emerging East Bay issues.
We have selected employment, construction, housing, commercial vacancy and inflation data as the primary indicators of the East Bay's economy. If you feel other indicators would be more enlightening or have suggestions on how to refine the content and format of either the Quarterly Forecast or the Monthly Report, we would be very interested in hearing from you.
The preliminary figure for Gross Domestic Product (GDP) growth in the fourth quarter of 2002 was increased to 1.4% from the advance estimate of 0.7%. The increase is due to upward revisions in private inventory investment and consumer spending on both services and non-durable goods. On the negative side, the trade deficit estimate widened due to both an increase in imports and a decrease in exports.
GDP is estimated to have increased 2.4% in 2002, up from 0.3% in 2001, with the final number to be released next month. Growth was driven primarily by increases in personal consumption, government spending, and residential investment. Nonresidential investment dropped sharply, particularly in spending on structures. Imports rose and exports fell for the second year in a row. After a massive inventory adjustment in 2001 as retailers worked to reduce inventories of durable goods overstocked during the boom years, inventory investment was flat in 2002 but appeared to be picking up in the final quarter as noted in the quarterly summary.
The California Employment Development Department is currently revising its labor and employment data to a March 2002 benchmark, so we are currently not able to provide seasonally adjusted employment data. Seasonally adjusted data will be available in the quarterly forecast published in April.
Payroll employment is a measure of employment at the firm level within a region. Unemployment, the employment statistic commonly cited, is a measure of employment at the residence level. Compared to surrounding regions, falls in payroll employment in the East Bay have been relatively small, indicating that jobs within the region have been maintained. In San Francisco and San Jose, however, the fall in payroll employment has been more extreme. As an exporter of labor to its surrounding regions, falls in payroll employment in San Francisco and San Jose are in part job losses by East Bay residents. Hence we observe the current market where the rise in the East Bay’s unemployment rate outstrips the actual loss of jobs in the East Bay region.
Winter has several prominent seasonal effects. The most extreme is in the retail sector, where firms prepare for the longer shopping hours and increased traffic by adding temporary workers for November and December. Winter is the down period for the construction industry, as building slows due to weather conditions.
For industry specific employment data, please visit here.
Despite recent price increases in Contra Costa County, the regional housing market has been growing more affordable since the summer. Still, the market is extremely tight in the Bay Area and across the state. The California Association of Realtors reports that the minimum household income needed to purchase a median-priced California home at the December average cost of $338,110 was $81,120 based on a typical 30-year, fixed-rate mortgage at 6.10 percent and assuming a 20 percent down payment. The Bay Area’s housing affordability index (the percent of households that can afford a single-family, median-sized home) was 23%, compared to 28% for California and 57% for the United States.
While affordability is still extremely low, local housing prices and sales seem to have lost some of the momentum characteristic of 2002. Prices in the San Francisco Bay Area were down 4.1% in January from December, with sales down 25.1%. Prices are up 6.4% and sales down 9.5% from January 2002. The median single-family home sold in 33 days in January, compared to 28 days in December. The Unsold Inventory Index (indicating the number of months needed to deplete the supply of homes on the market at the current sales rate) rose to 3.4 months, compared to 2.6 months in December.
2003 started off strong due to high permitting in Contra Costa County. Brentwood issued 127 single-family and Richmond 200 multi-family permits, continuing the region’s northern and eastern expansion. In Alameda County, Dublin issued permits for 103 family units. Berkeley issued $5.2 million worth of industrial permits, Livermore added $3.2 million worth of new office buildings, and Oakland $1.2 million worth of new stores. In sum, the East Bay permitted 483 single-family units, 469 multi-family units, $12.2 million of new commercial property, and $5.7 million of new industrial property.
For more information on construction, please visit here.
While the increase in shelter prices for January looks fairly dramatic, the effect is largely due to seasonal increases in the price of lodging away from home, i.e. hotel and motel rooms. Rental prices and owner’s equivalent rent (a measure of change in the price of shelter services provided by owner-occupied housing) changed little in January from December.
