San Diego Business Journal

Two Indexes Show Region's Economic Health

By John Cox Monday, January 9, 2017
   

A local economic index jumped in November by its biggest margin in more than half a year, owing to improvement in the areas of consumer confidence, residential permitting activity and initial claims for unemployment.

It was the latest sign San Diego’s business community continues to enjoy positive market conditions, even as concerns rise that the region may face a mixed bag under President-elect Donald Trump. His pledge to spend big on the military and infrastructure has heartened some local businesses but worried others with his comments about tightening immigration and imposing new tariffs on imports.

The 0.3 percent gain in the University of San Diego Burnham-Moores Center for Real Estate’s Index of Leading Economic Indicators for San Diego County came despite declines in local stock prices and help-wanted ads.

After a steep rise followed by a modest correction in 2015, the monthly updated index was relatively flat in 2016. Since April, the gauge has risen twice, fallen four times and once remained unchanged.

Comments accompanying the update, released Jan. 5, predicted continuing but slower local economic growth in 2017. The center said the region is expected to add 25,000 jobs this year, and that the county’s unemployment rate is likely to increase to 4.6 percent from the current 4.3 percent.

“While November’s increase is welcome news, more is needed in the coming months to adjust the outlook, which is currently for a positive but slower growing local economy in 2017,” the update stated.

Authorizations for multifamily residential construction increased for a second consecutive month in November, which is typically a very slow time for such permits, the two-page report noted.

It said the labor market was mixed. A tally of unemployment insurance claims improved at a time of year when it typically doesn’t, while help wanted advertising declined for an eighth straight month.

Meanwhile, consumer confidence grew for a fifth consecutive month and local stock prices declined overall, even though they ended November higher than they were at the month’s start.

The only other component of the local gauge, the national Index of Leading Economic Indicators, held steady in November.

Another gauge of local business conditions, the San Diego Regional Chamber of Commerce’s monthly Business Outlook Index, shot up in November from its lowest level on record. The index measures business confidence.

The index rebounded to 18 from 9 in October, with retail businesses jumping in confidence from 8 to 25. But the gains were unevenly spread, and pessimism was reported in areas including hospitality, restaurants and transportation-related companies.

That index has been up and down in 2016, and its November level was still well below its range in recent years past.

San Diego’s economy has risen sharply since bottoming out in 2010. But after racking up more than 81,000 job losses during the Great Recession, the region has added an estimated 178,000 jobs.

The region’s unemployment rate has improved drastically during that period, going from a 2010 average of 10.8 percent to a projected 4.3 percent in 2016.

What happens after Trump takes office Jan. 20 has been the subject of much speculation locally. Economists see his proposed tax cuts and regulatory reform as stimulating many businesses here and across the country. But depending what policies he is able to institute, the gains are not expected to be evenly distributed.

Other factors likely to influence local prosperity are higher interest rates and a $1-per-hour minimum wage that took effect Jan. 1 in San Diego.

Locally, potential winners in 2017 include defense, retail, manufacturing, financial services and construction. Potential losers range from health care and housing to hospitality and trade.