Monday, January 12, 2009

Leading economic indicators fell again in November

Professor Duy released the U of O Index of Economic Indicators for November last week.

The University of Oregon Index of Eco­nomic Indicators™ fell again in November to 89.6 (1997=100), a 0.5 percent decline from the previous month. Compared to six months ago, the UO Index is down 7.9 percent (annualized). Deteriorating labor market conditions, as measured by initial jobless claims and payrolls at employment service agencies, drove index weakness during November. Remaining indicators were either unchanged or improved slight­ly. Overall, the UO Index indicates that Or­egon remains in recession.

As a general rule of thumb, a decline of 2.5 percent (annualized) over six months, coupled with a decline in more than half of its components, signals that a recession is likely imminent.

On the job market
The recession continues to weigh heav­ily on Oregon labor markets. Initial job­less claims spiked higher in November to a weekly average of almost 14,000, well above the peak of 10,245 reached during the 2001 recession. Payrolls at employ­ment services firms (largely temporary help agencies) fell for the fourth consecu­tive month and are down 8.6 percent com­pared to year-ago levels. Total nonfarm payrolls (not included in the UO Index) indicate that firms shed 6,300 employees in November and 34,900 employees since February of 2008. The Oregon unemploy­ment rate climbed to 8.1 percent, the high­est since September 2003. The depth of the downturn in the Oregon labor market will almost certainly exceed that of the 2001 recession.

On housing starts and capital spending
For the fifth consecutive month, residential building permits (smoothed) remain near a monthly level of 1,000. Recent stabilization in this indicator is a hopeful sign that new residential construction activity has bot­tomed. Still, permit activity remains very low, housing markets deteriorated further in November, and there is lit­tle to indicate that an
upturn is near.