Market Expectations and Conditions
In the first Quarterly Report of 2013, the UCLA Anderson Forecast’s outlook for California calls for slow, steady but unexceptional economic growth in the current year with gradually accelerating growth in the following two year.
The forecast in California for 2013 and 2014 is not much different than December’s prognostication, with adjustments for recent data. Total employment growth for 2013, ’14 and ’15 is expected to be 1.6%, 2.2% and 2.3% respectively; non-farm payroll employment will grow more slowly at 1.4%, 2.1% and 2.3% for the same three.
In the California forecast report, authored by Senior Economist Jerry Nickelsburg, he writes that the factors which have driven California employment and income growth to higher rates than the U.S. remain in play. He says that as the world economy improves, and as investment in the U.S. improves, California will once again have a disproportionate share of the improvement. With that in mind, real personal income growth is forecast to be 1.4% in 2013, followed by 3.6% in 2014 and 3.3% in 2015. Unemployment will fall through 2013 and will average about 9.6% this year. In 2014, the unemployment rate is expected to fall to 8.4% and then to 7.2% in 2015.
January State and Local Employment Report
The Employment Development Department (EDD) released their monthly state and local employment reports for January. Total California nonfarm employment increased by 1,700 jobs in January, measured in seasonally adjusted terms. The non-seasonally adjusted figure was a decline of 268,300 jobs, reflecting the large December to January change in seasonal employment.
The year-over-year change showed an increase of 254,900 jobs (SA), which equates to a growth rate of 1.8%. California’s private sector added 233,300 jobs over the year, but part of that gain was offset by the loss of 21,600 jobs in the public sector.
California’s unemployment rate held steady at 9.8% in January. A year ago, the unemployment rate was 11.0%. The number of people attached to the labor force increased by 0.2% over the month and by 0.6% over the year.
The reason for the delay in the release of the January employment reports is that every year at this time, the EDD updates employment and labor force data to reflect additional data inputs and estimation techniques. This process results in a revision to historical labor force numbers and industry employment data. As with the BLS report covering the national employment situation in January, this re-benchmarking process resulted in a significant upward revision of job counts for 2012. The annual 2012 nonfarm job gain for California (based on the establishment survey) was revised upwards from an estimated 225,900 jobs to 295,700 jobs. This corresponds to a 2.1% increase in nonfarm jobs for the year, up from the previously estimated value of 1.7%.
Additionally, revisions to the household survey showed that there were 790,800 more people attached to the labor force than initially estimated, while the household employment count was revised up by 856,500 workers. There was no downward revision to the unemployment rate, but altogether, the revisions show there was more progress made last year than had been previously reported.
County highlights (County level numbers are not seasonally adjusted):
- In Los Angeles County, the unemployment rate in January was 10.4%, up slightly from 10.3% in December. A year ago, the unemployment rate stood at 11.6%. Last month, total nonfarm employment in Los Angeles County declined by 81,000 jobs, but over the year to January, the number of jobs expanded by 73,800, an increase of 2.0%.
Trade, transportation and utilities lost 25,900 jobs over the month. Not surprisingly, the job losses were concentrated in the retail sector, which trimmed January payrolls by 19,700 jobs. Information posted the second largest month- over loss. Of the 15,400 jobs lost in this sector, 14,000 were in motion picture and sound recording. There was a similar drop in employment in this industry last January, so there appears to be some seasonality in motion picture and sound recording employment.
Job declines were wide spread across most industry sectors in January. The only two sectors to post a month-over gain were construction (800 jobs) and other services (200 jobs).
- The January unemployment rate in Orange County rose to 7.1% from the December rate of 6.8%. In January 2012, Orange County’s unemployment rate was 8.1%. Nonfarm payrolls contracted by 28,000 jobs over the month but were up by 30,600 jobs over the year (an increase of 2.2%).
- In the Riverside-San Bernardino area, the unemployment rate in January was 11.5%, up from 11.0% in December but below the 12.7% figure posted during January 2012. Nonfarm payrolls declined by 19,400 jobs over the month but increased by 24,200 jobs over the year.
- The unemployment rate in San Diego County in January was 8.6%, down from the year-ago estimate of 9.5%. Nonfarm payroll jobs decreased by 22,200 over the month but were up by 30,600 jobs over the year.
- In Ventura County, the unemployment rate was 9.0%, down from the year ago estimate of 9.8%. Last month, total nonfarm employment fell by 4,200 jobs. Over the year ending in January, the number of jobs in Ventura County was up by 3,700.
Source: Kimberly Ritter-Martinez (LAEDC) and www.labormarketinfo.edd.ca.gov/
Southland Begins 2013 With Sales and Price Gains Vs. Year Earlier
Southern California logged the highest February home sales in six years last month amid relatively strong sales of mid- to high-end properties and a record share of homes sold to absentee buyers. The median sale price edged slightly lower from January but rose nearly 21 percent from a year earlier, marking the 11th straight month in which the median has risen year-over-year, a real estate information service reported.
A total of 15,945 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 0.7 percent from 16,058 sales in January, and up 1.0 percent from 15,780 sales in February 2012, according to San Diego-based DataQuick.
Last month’s sales were the highest for the month of February since 17,680 homes sold in February 2007, but they were 9.9 percent below the February average of 17,696 sales. The low for February sales was 10,777 in 2008, while the high was 26,587 in 2004.
“Our January and February stats certainly indicate housing remains a big target for investors. But typically those two months don't offer much insight into how the market will behave the rest of the year. These are sales that closed in January and February, meaning many of the buyers were out home shopping during the holiday season late last year. That's when many traditional buyers and sellers drop out of the market, leaving a relatively high concentration of very motivated market participants, especially investors,” said John Walsh, DataQuick president.
“March and April will offer a better view of how broader market trends are shaping up this year. One of the real wild cards will be how many more homes go up for sale. More people who've long been thinking of selling will be tempted to list their homes at today's higher prices. Fewer people will be underwater and therefore could at least break even on a sale. Some investors who've held for a while will consider cashing in. A meaningful rise in the supply of homes on the market should at least tame price appreciation.”
Indicators of market distress continue to move in different directions. Foreclosure activity remains far below peak levels. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.