Southland’s Recovery Slowing, Study Finds
Southern California’s recovery appears to be losing steam, according to an economic report released Thursday.
The Southern California Leading Economic Indicator, prepared by Cal State Fullerton, reported an increase of 0.18% to its index value after a gain of 0.92% in the first quarter. Although the region’s rebound doesn’t yet appear to be in jeopardy, signs point to sluggish activity for the remainder of the year.
“We’re not predicting a huge amount of growth,” said economist Adrian Fleissig, author of the indicator. “This is going to be a very mild recovery.”
Fleissig’s index, which he developed two years ago to predict the health of the Southern California economy, is consistent with other recent data showing the U.S. recovery is slowing.
The Commerce Department said Wednesday that U.S. gross domestic product grew at an annual rate of 1.1% in the second quarter--about half of what had been expected and well off the 5% pace of earlier this year. Likewise, a factory activity index released Thursday by the Institute for Supply Management showed that U.S. manufacturing growth stalled in July after several months of gains.
Some slowing had been expected after a brisk first quarter in which U.S. businesses restocked their depleted inventories. But corporate governance scandals and a Wall Street meltdown now appear to be rattling the confidence of consumers and businesses alike, who are showing signs of pulling back on spending and investing.
Many economists say a so-called “double-dip” recession is unlikely. Still, concerns about a near-term slowdown are likely to inspire caution, particularly when it comes to hiring. So far this year, California employers have created an average of 600 jobs a month, compared with 40,500 a month during the boom of 2000.
The good news, according to Fleissig, is that his indicator signals that hiring is likely to show a modest improvement over the next three to six months.
The Southern California Leading Economic Indicator projects regional economic activity for Los Angeles, Orange, San Bernardino-Riverside, Ventura and Imperial counties. It tracks seven national and regional components. The national variables are money supply, interest rates and the Standard & Poor’s 500 stock index. The regional components are nonfarm employment, the unemployment rate, building permits and Pacific-region consumer confidence.
In the second quarter, declines were seen in two of the indicator’s seven components--the S&P; 500 index and Southern California nonfarm employment--while the others increased.
