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.
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Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.7% in the fourth quarter of 2005, according to final estimates released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 4.1%.
The slowdown in fourth-quarter GDP growth primarily reflected a deceleration in consumer spending, an acceleration in imports, a downturn in Federal government spending, and decelerations in equipment-and-software and residential investment. In contrast, inventory investment turned up, and exports accelerated.
Corporate Profits
Profits from current production increased 16.4% in 2005, compared to an increase of 12.6% in 2004 and 16.4% in 2003.
Profits after tax with inventory valuation and capital consumption adjustments increased 9.4%, compared with an increase of 11.3% in 2004 and 20.5% in 2003.
Fourth quarter 2005 profits increased by 14.4% (compared to a negative 4% in the third quarter 2005), while Profits After Tax increased 3.8%, compared to –4.3% in the 3rd quarter.
COST OF LIVING
On a seasonally adjusted basis, the CPI-U advanced 0.1% in February, following a 0.7% rise in January. Energy costs, which increased 5.0% in January, declined 1.2% in February and the food index rose 0.1% in February after increasing 0.5% in January.
US Cities Shelter costs rose 0.4% in February, while Bay Area Shelter costs increased 1.07% in December 2005, 1.38% in January 2006 and 1.73% in February – substantial increases after very little change since October 2003.
Since February 2003, the Bay Area’s CPI has experienced consistently lower monthly increases than the US Cities. In February 2001, the Bay Area’s CPI was 6.9% greater than the US City average, but by February 2006, it was only 4.2% greater. However, that grace period may be approaching an end.
The annual growth rate of the US City CPI decreased from 4.0% in January 2006 to 3.6% in February, while the Bay Area’s increased from 2.4% to 2.9%.
(For more on Cost of Living, click here)
The unemployment rate in the East Bay (the Oakland-Fremont-Hayward MD) remained stable at 4.6% in January and February 2006, and below the year-ago estimate of 5.6%. This compares with an unadjusted unemployment rate of 5.4% for California and 5.1% for the nation during the same period. Within the East Bay, the unemployment rate was 4.7% in Alameda County and 4.5% in Contra Costa County.
The East Bay actually exceeded its January 2001 workforce of 1,293,200 in October and December 2005, by 2,600. But the Bay Area’s Labor force numbers have all declined as a whole from October 2005 to February 2006, with the greatest loss occurring in the East Bay, which is down 38,700 (-3%), with San Jose down 12,300 (-1.4%) and San Francisco losing 7,400 (-0.8%).
This decrease happened relatively quickly, and almost reached the East Bay’s low point in May 2004 of 905,900. This is a much greater decrease than has previously occurred during comparable periods since 2001.
In that timeframe, the largest East Bay workforce loss was –1,700 in 2002-03. Both San Jose, with a February 2006 workforce of only 838,200, and San Francisco at 909,400, reached all-time workforce lows (since 2001).
Compared to 12 months ago, there were 13,300 fewer workers in the East Bay, 20,700 less in San Francisco and 12,900 fewer in San Jose. Between January and February 2006, there were 5,200 fewer workers in East Bay, 1,100 fewer in San Francisco and 3,600 less in San Jose.
The comparison of employed residents for the three MSA’s is similar, with 32,500 fewer (-2.6%) East Bay residents without jobs since October 2005. This was not quite as large a decrease as in the labor force, and 26,300 more residents were employed than had jobs at the low point of 1,147,300 in May 2004.
In the same October 2005 to February 2006 comparison, San Francisco had 3,500 fewer (-0.4%) employed and there were 8,300 fewer employed residents (-1%) in San Jose.
In a comparison of the previous 12-months, there were 900 fewer employed residents in the East Bay and 13,000 less in San Francisco and 2,200 less in San Jose were employed. But between January and February 2006, there were 5,700 less in East Bay residents with jobs, 1,500 fewer in San Francisco and 3,500 less in San Jose were employed.
(For more on Bay Area Employment, click here)
Between February 2005 and February 2006, the number of East Bay jobs grew by 23,500, or 2.3%.
The construction boom continued to bolster payrolls, up 8,800 jobs, predominantly in specialty trade contractors (up 6,000 jobs).
Professional and business services added 4,300 jobs, mainly in administrative and support services (up 3,300 jobs).
Leisure and hospitality increased payrolls by 3,700 jobs, mostly in accommodation and food services (up 2,300 jobs).
Information declined by 1,400 jobs, largely in publishing industries (down 700 jobs).
East Bay Primary Industry Sectors | 1 Month Change | 12 Month Change | 24 Month Change | Change from 2/01 |
Construction | 1,900 | 8,800 | 13,200 | 10,300 |
Professional and Business Services | 400 | 4,300 | 7,800 | -9,400 |
Leisure and Hospitality | 600 | 3,700 | 4,700 | 8,200 |
Financial Activities | 400 | 3,300 | 5,600 | 15,600 |
Retail Trade | -1,800 | 3,200 | 5,000 | 300 |
Educational and Health Services | 1,500 | 2,400 | 3,500 | 9,700 |
Government | 1,400 | 700 | -700 | 3,100 |
Other Services | 200 | 100 | -1,300 | 1,100 |
Wholesale Trade | 100 | -100 | 200 | -8,400 |
Trans, Warehousing & Utilities | 0 | -200 | 500 | -8,100 |
Manufacturing | 300 | -1,300 | -3,300 | -25,000 |
Information | -100 | -1,400 | -2,100 | -9,600 |
| | Source: CA Employment Development Dept. |
East Bay manufacturers are having a very hard time. In 2005, the manufacturing industry business lost -2,100 more jobs, after what appeared to be the beginning of a recovery in 2004 (that ended up in the loss of –800). Computer and Peripheral Equipment has lost the most (-2,100) in the last two years, while Petroleum & Coal Products lost jobs –700 jobs.
Communications Equipment lost the most (-8,800) in the previous three years but actually added 600 in the last two years.
(For more on East Bay Sector Employment, click here)
Bay Area home sales remained at their lowest level in five years in February, as price increases continued to slow, according to DataQuick Information Systems.
A total of 6,206 new and resale houses and condos were sold in the nine-county region last month. That was up 3.4% from 6,004 for January, but down 16.8% from 7,463 in February 2005.
Normally sales decline from January to February, but February 2005 was the strongest in DataQuick's records, which go back to 1988. However, February 2006 was the eleventh in a row to see a year-over-year sales decline.
The median price paid for a Bay Area home was $616,000 last month. That was up 1.5% from January's $607,000, and up 12.2% from $549,000 for February a year ago. The annual price increase was the lowest since prices rose 9.7% to $443,000 in January 2004. It's probable that appreciation will dip into the single digits again this spring.
(For more on Housing, click here)
In December 2002, commercial project(s) in San Francisco brought the non-residential permit total for the month to $348,783,036, and that will continue to give San Francisco a substantial boost in the 12-month commercial and total permit comparisons that follow.
| Bay Area MSA | Total Permit Change | Total Permit % Change |
| East Bay | $387,527,507 | 9.4% |
| Napa MSA | -$23,154,140 | -6.3% |
| San Francisco MSA | $811,187,301 | 29.9% |
| San Jose MSA | $406,047,236 | 16.5% |
| Vallejo-Fairfield MSA | $279,672,983 | 19.3% |
In a comparison of two, twelve-month periods (March 2004 to February 2005 vs. March 2005 to February 2006), the Bay Area MSA’s (except for Napa) experienced an increase in the total value of construction permits issued.
When Commercial and Industrial permits are compared, only the San Francisco, San Jose and Napa MSA’s showed an improvement.
(For more on Construction Permits, click here)
The PKF Consulting report on hotel trends for January 2006 shows an increase in room rates throughout Northern California of 6.5%. The East Bay’s Average Daily Room Rate increased by 2.3% to $100.96 but moved down to 8th on the list. East Bay hotels experienced the second to the lowest percentage increase in room rates from January 2005 to January 2006.
Occupancy rates generally increased, with only the Napa County, San Francisco Airports and Sacramento areas declining. The East Bay experienced the 5th highest percentage increase in occupancy with an improvement of 8.5%, raising the East Bay occupancy rate to 57.6%, but it remains and 9th on that list, the same position it had in January 2005.
| | AVERAGE DAILY ROOM RATE | OCCUPANCY PERCENT |
| Jan-06 | Jan-05 | % Change | Jan-06 | Jan-05 | % Change |
| San Francisco | $159.41 | $146.81 | 8.6% | 62.3% | 59.9% | 4.0% |
| Monterey/Carmel | 156.09 | 167.18 | -6.6% | 51.4% | 50.2% | 2.4% |
| Marin County | 129.02 | 118.72 | 8.7% | 61.5% | 57.1% | 7.7% |
| Napa County | 118.92 | 116.78 | 1.8% | 52.8% | 54.8% | -3.7% |
| San Jose/Peninsula | 113.01 | 107.33 | 5.3% | 63.9% | 56.8% | 12.5% |
| San Francisco Airport | 101.52 | 93.8 | 8.2% | 65.4% | 66.3% | -1.4% |
| Sonoma County | 101.47 | 90.35 | 12.3% | 55.5% | 50.2% | 10.4% |
| Oakland/East Bay | 100.96 | 98.7 | 2.3% | 57.6% | 53.1% | 8.5% |
| Sacramento | 92.05 | 86.77 | 6.1% | 63.2% | 63.3% | -0.2% |
| Other Northern California | 84.33 | 76.07 | 10.9% | 58.3% | 53.8% | 8.3% |
| Central Valley | 69.02 | 63.29 | 9.1% | 65.2% | 59.9% | 9.0% |
| Overall Average | $120.00 | $112.73 | 6.5% | 61.5% | 58.2% | 5.7% |
| | | | Source: PKF Consulting |
The East Bay’s Average Daily Room Rate tends to be steadier than the other areas’ rates – perhaps because it has a larger percentage of commercial business travelers it caters to. The Napa/Sonoma rate certainly reflects the large numbers of visitors to those Napa Valley wineries.
(For more on Hotel Occupancy, click here)
