| | | | EAST BAY FEBRUARY 2006 MONTHLY ANALYSIS | | The East Bay Monthly Analysis is prepared by EDAB staff to augment the East Bay Quarterly Forecast authored by economists at the UCLA Anderson Forecast. Monthly and quarterly reports may be viewed and subscribed to for free by going to: www.edab.org/newsletter.html. EDAB welcomes your comments and suggestions. Send your email to analysis@edab.org or call us at (510) 272-3885. For a more printable (PDF) version of this newsletter, click here. Real Gross Domestic Product (GDP) -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.6 % in the fourth quarter of 2005, according to preliminary estimates released by the Bureau of Economic Analysis (in comparison to the 4.1 % increase in the third quarter). 
(For more on GDP and Corporate Profits, click here) COST OF LIVING The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8 % in January, before seasonal adjustment. The January level of 198.3 (1982-84=100) was 4.0 percent higher than in January 2005. On a seasonally adjusted basis, the CPI-U advanced 0.7 % in January, following declines in each of the previous two months. Energy costs increased 5.0 % in January, its first advance since September and accounted for about 70 % of the advance in the overall CPI-U. 
Within energy, the index for petroleum-based energy increased 5.7 % and the index for energy services rose 4.2 %. The food index rose 0.5 % in January after increasing 0.1 % in December. The index for all items less food and energy increased 0.2 % in January, following a 0.1 % increase in December, reflecting upturns in the indexes for new vehicles and for apparel. The index for shelter increased 0.1 % in January, following a 0.3 % rise in December. The index for fuels and utilities, which decreased 1.3 % in December, increased 3.4 % in January 2006. Fuel oil declined for the fourth consecutive month--down 1.9 % in January, while electricity and natural gas each increased in January, advancing 5.5 and 1.7 %, respectively. | | US Cities All | US All Cities Shelter | Bay Area All | Bay Area Shelter | | Jan-05 | 190.7 | 221 | 200.3 | 254 | | Feb-05 | 191.8 | 222.5 | 201.2 | 254.6 | | Mar-05 | 193.3 | 224.4 | 201.8 | 254.1 | | Apr-05 | 194.6 | 224.4 | 202.5 | 253.1 | | May-05 | 194.4 | 224 | 201.8 | 254.1 | | Jun-05 | 194.5 | 224.5 | 201.2 | 253.9 | | Jul-05 | 195.4 | 225.6 | 202.1 | 253.4 | | Aug-05 | 196.4 | 225.6 | 203 | 253.4 | | Sep-05 | 198.8 | 224.4 | 204.4 | 253.9 | | Oct-05 | 199.2 | 225.7 | 205.9 | 254.8 | | Nov-05 | 197.6 | 225.4 | 204.6 | 255.1 | | Dec-05 | 196.8 | 225.6 | 203.4 | 255.6 | | Jan-06 | 198.3 | 226.8 | N/A | 257.5 |
The annual growth rate of the Bay Area’s CPI decreased from 2.4% in November to 2.0% in December while the US City average decreased only slightly from 3.5% to 3.4%. 
In February 2003, the Bay Area’s CPI was 197.7, 14.7% above the US City figure of 183.1. Since then, consistently lower monthly rates have reduced that lead to only 3.35%, with the Bay Area reaching 203.4 vs. the US City index of 196.8 (the CIP index compares prices with an average of the 36-month period covering the years 1982, 1983, and 1984, which is equal to 100). (Note: data is only available bi-monthly for Bay Area All and Bay Area Less Shelter, so odd months are averaged.) Percentage Change From The Previous Year’s Corresponding Month | | US City Annual % Chg | Bay Area Annual % Chg | | Jan-05 | 3.3% | 2.2% | | Feb-05 | 3.0% | 1.9% | | Mar-05 | 3.0% | 1.6% | | Apr-05 | 3.1% | 1.8% | | May-05 | 3.5% | 2.1% | | Jun-05 | 2.8% | 1.6% | | Jul-05 | 2.5% | 1.1% | | Aug-05 | 3.2% | 1.6% | | Sep-05 | 3.6% | 2.2% | | Oct-05 | 4.7% | 2.5% | | Nov-05 | 4.3% | 2.8% | | Dec-05 | 3.5% | 2.4% | | Jan-06 | 3.4% | 2.0% |
(For more on Cost of Living, click here) Unemployment rates (not seasonally adjusted) for the major Bay Area MSAs all decreased by 0.7% from November 2005 to December 2005, after remaining fairly stable for about six months. In the East Bay, the rate decreased from 4.8% for November to 4.1% in December 2005, San Jose’s went from 5.3% to 4.6%, and San Francisco (which continued to have the lowest rate of the three) went from 4.5% to 3.8%. 
California’s unemployment rate also decreased from 5.1% in November to 4.8% in December 2005, while the national rate declined from 4.8% to 4.6%. Within the East Bay, the December unemployment rate was 4.2 percent in Alameda County and 4.0 percent in Contra Costa County. The Bay Area’s Labor force numbers have improved as a whole since May 2004, though San Jose has changed very little. The region that suffered the most in the recent recession, San Jose, still has 132,300 fewer workers than it had in January 2001. San Jose experienced a 500-person decrease in its workforce from November to December, but has added 7,800 to its workforce since December 2004 and only 8,700 since May 2004. San Francisco’s labor force is also a long way from recovering its previous numbers, as it still has 85,600 fewer workers than in January 2001. But San Francisco has added 26,900 since May 2004, with 12,100 in the last year and 2,700 in the last month The East Bay finally regained its January 2001 workforce of 1,293,200 in October 2005 and in December 2005, it exceeded that amount by 2,600. The East Bay has added almost twice as many to its workforce as San Francisco, with a total of 52.300 since December 2004, and 5,100 added in the last month. In 2000, San Jose imported 23% of its workforce from outside Santa Clara County. The East Bay provided the majority of these workers, so its unemployment rate and number of employed residents was impacted significantly by the jobs lost in San Jose. 
(For more on Bay Area Employment, click here) January 2001 to December 2005 and December 2004 to December 2005 East Bay Analysis The highly developed high-tech and value-added industries in the Bay Area were hit very hard with the high-tech recession of 2001-2004. In the East Bay, the industry sectors most impacted by the recession were Information, Manufacturing, and Professional and Business Services. Wholesale Trade and the Transportation, Warehousing & Utilities sectors have also have been impacted by recession and the rising cost of land in the Bay Area, so quite a few of these jobs were moved out to the Central Valley where land is relatively cheaper. However, rising transportation costs (especially for those products that need to be shipped back into the Bay Area) and “just-in-time” delivery requirements are encouraging some of these businesses to move back into the East Bay. | Industry Sector | Change in Employment from 1/2001 to 12/2005 | Percent Change From 1/2001 | Educational and Health Services | 17,100 | 15.7% | Financial Activities | 15,600 | 27.8% | Leisure and Hospitality | 10,600 | 14.3% | Construction | 8,300 | 12.4% | Retail Trade | 4,100 | 3.6% | Other Services | 2,900 | 8.7% | Government | 1,600 | 0.9% | Trans, Warehousing & Utilities | -7,000 | -16.5% | Wholesale Trade | -7,500 | -13.4% | Information | -9,400 | -23.7% | Professional and Business Services | -12,600 | -7.8% | Manufacturing | -19,800 | -16.5% | Source: CA Employment Development Dept. |
The East Bay’s manufacturing businesses that made high-tech products, component parts or provided the machinery for component and product manufacturers, lost the most jobs of the East Bay industry sectors since 2001. The manufacturing sector lost -19,800 jobs since January 2001, and that -16.5% loss is only recently beginning to be recover with 500 jobs gained in the last 12 months and no change in the last month. Within the Manufacturing sector, the Communications Equipment sub-sector took the hardest hit because too much production capacity was built. This sub-sector lost –8,400 jobs (-32.8% of that sector’s employment) since 2001. It lost –200 more in 2005 but regained 100 in the last month. Of the other sub-sectors in Manufacturing, Industrial Machinery Manufacturing lost -2,600 (-47%), Computer and Peripheral Equipment Manufacturing lost –900 (-13.6%) and Residual-Miscellaneous Manufacturing lost –4,900 (-17.5%). The latter sub-sector has continued to lose jobs, -500 in the last year and –100 in the last month. Transportation Equipment Manufacturing actually gained 400 jobs (5.6%) also since January 2001. (For more on East Bay Sector Employment, click here) A total of 6,004 new and resale houses and condos were sold in the nine-county region last month. That was down 35.8% from the 9,347 sold in December 2005, 20.0% below the January 2005 total of 7,509. Sales of Bay Area homes in January 2006 fell to the lowest level in five years as price increases continued to ease back, according to DataQuick Information Systems. A seasonal decline is normal from December to January, but last month was the tenth in a row to see a year-over-year sales decline. The January sales count was the lowest for any month since January 2001 when 5,977 homes were sold. | All Homes | Number Sold 1/6/2006 | Annual Pct. Chg | Median 1/1/2006 | Annual Pct. Chg | | Alameda | 1,259 | -16.20% | $562,000 | 13.50% | | Contra Costa | 1,197 | -14.10% | $570,000 | 20.00% | | Marin | 210 | -32.00% | $741,000 | 0.10% | | Napa | 103 | -37.20% | $596,000 | 10.00% | | San Francisco | 335 | -20.80% | $722,000 | 5.60% | | San Mateo | 450 | -16.20% | $562,000 | 4.80% | | Santa Clara | 1,486 | -14.10% | $570,000 | 14.70% | | Solano | 504 | -32.00% | $741,000 | 22.80% | | Sonoma | 460 | -37.20% | $596,000 | 16.60% | | Bay Area | 6,004 | -20.80% | $722,000 | 13.70% | | Source: DataQuick Information Systems |
The median price paid for a Bay Area home was $607,000 last month. That was down 0.3% from December's $609,000, but up 13.7% from $534,000 for January 2005. That annual price increase was the lowest since prices rose only 13.1% to $474,000 in March 2004. Appreciation is expected to decrease to a single digit during the next month or two. 
The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,798 in January 2006. That was down from $2,867 in December 2005, and up from $2,344 for January 2005. Adjusted for inflation, mortgage payments are 13% higher than they were at the peak of the prior cycle sixteen years ago. The percentage of households in California able to afford a median-priced home stood at 14% in December 2005, compared with 19% for the same period a year ago, according to the California Association of REALTORS® (C.A.R.). (For more on Housing, click here) In a comparison of two, twelve-month periods (February 2004 to January 2005 vs. February 2005 to January 2006), the Bay Area MSA’s (except for San Jose) experienced a substantial increase in the total value of construction permits issued. The East Bay issued over $4.08 billion the first 12-month period, and $4.48 billion in the most recent 12-month period, a 10% increase totaling $405.8 million in construction permits. In the same time period comparison, San Francisco issued $2.73 billion total in the first 12-months and $2.72 billion in the second period: a 31.3% increase totaling $648.9 million. Meanwhile, San Jose issued $992.8 million in the first 12-months and only $928.1 million in the most recent 12-month period, a -6.5% decline totaling $64.7 million. 
When Commercial and Industrial permits are compared for the same periods, only San Francisco showed an improvement, (and it was huge) a 315% increase ($289.2 million more) in Commercial permits and 536% increase ($37.8 million more) in Industrial permits. Meanwhile, the East Bay issued –7.8% ($24.9 million) less in Commercial and -39.3% ($31.2 million) less in Industrial Permits. 
In a comparison of Single and Multi-Family Unit permits issued for the same time periods, the East Bay issued 548, (8.6%) more Single-Family but –239 fewer (-5.6%) Multi-Family Unit permits. San Francisco issued –409, fewer (-31.8%) Single Family Unit permits, and –120 fewer (-3.9%) Multifamily Unit permits. Meanwhile, San Jose issued –119 less (-22.1%) Single Family and –64 fewer (-13.1%) Multifamily Unit permits. (For more on Construction Permits, click here) The PKF Consulting report on hotel trends for November 2005 shows an increase in room rates throughout Northern California. The East Bay’s Average Daily Room Rate reported in our November 2005 Update was $105.26 in September, and it was 6th on the list. In December 2005, it had decreased to $101.88 and moved down to 7th on the list. But East Bay hotels experienced the second to the lowest percentage increase in room rates from December 2004 to December 2005 of 0.4%. The San Francisco Airport hotels had a rate decrease of –1.2%. Occupancy rates generally increased, with only Sacramento and Other Northern California areas declining. The East Bay experienced the 4th highest percentage increase in Occupancy with an improvement of 4.3%, raising the East Bay occupancy rate to 53.6% and 7th on the list, the same position it had in December 2004. December 2005 | AVERAGE DAILY ROOM RATE | OCCUPANCY PERCENT | | 2005 | 2004 | VAR | 2005 | 2004 | VAR | San Francisco | $144.87 | $135.65 | 6.8% | 64.5% | 63.1% | 2.2% | San Francisco Airport | 83.68 | 84.67 | -1.2% | 60.8% | 60.2% | 0.9% | San Jose / Peninsula | 102.56 | 96.70 | 6.1% | 49.2% | 44.2% | 11.3% | Oakland/ East Bay | 91.83 | 91.43 | 0.4% | 53.6% | 51.4% | 4.3% | Monterey /Carmel | 174.83 | 169.19 | 3.3% | 48.9% | 48.8% | 0.1% | Central Valley | 64.24 | 61.15 | 5.1% | 62.9% | 61.2% | 2.8% | Sacramento | 87.04 | 82.07 | 6.1% | 59.2% | 59.8% | -1.0% | Marin County | 128.35 | 120.87 | 6.2% | 71.1% | 64.5% | 10.2% | Napa County | 135.32 | 131.37 | 3.0% | 48.6% | 47.4% | 2.4% | Sonoma County | 97.00 | 81.07 | 19.7% | 53.2% | 49.8% | 6.8% | Other Northern California | 86.50 | 83.21 | 4.0% | 54.0% | 56.2% | -3.9% | Overall Average | $114.39 | $108.66 | 5.3% | 58.5% | 56.8% | 3.0% | | | | Source: PKF Consulting |
(For more on Hotel Occupancy, click here) | | 
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