California passed the midyear point with mixed economic indicators.
Employment growth, construction and real estate activity have all slowed
considerably from last year. However, much of the slowdown appears centered in
the San Francisco Bay area. Southern California continues to post moderate
gains, particularly in employment and real estate.
- The industry employment situation thus far in
2001 has changed notably from 2000. Through July, month-to-month job growth
has averaged 7,230 versus over 46,000 during 2000. July’s 1.6 percent
year-over-year growth rate is the slowest rate recorded since October 1994.
- Government has been the employment growth
leader for the last several months with gains averaging nearly 10,000 per
month in May, June, and July, while total private employment dropped in each
of these months. During July, retail trade was the only private job sector
to post a gain. Manufacturing employment dropped 12,000, led by losses in
electronics and food processing—the latter stemming from unseasonably cool
weather that delayed harvests and the bankruptcy of a major canner.
- Looking at year-over-year performance,
services added the most jobs, 94,900, while construction grew the fastest,
3.6 percent. Both durable and nondurable manufacturing declined over
the year—by 25,900 and 14,100 respectively.
- California’s unemployment rate dropped
two-tenths of a percent in July to 4.9 percent—0.1 percent below the
year-ago rate. Household employment rose by 12,000 in July, while the number
of people unemployed fell by 43,000.
- Regionally, the most dramatic changes in the
employment picture are occurring in the high tech centers of the San
Francisco Bay Area. A year ago overall industry employment in this region
posted a 4.9 percent annual growth rate. In July 2001, employment rose only
1.1 percent from the comparable 2000 level. More tellingly, employment in
business services, which is dominated by computer programming and
internet-related services, slowed from a 20 percent year-over-year rate a
year ago to only 1.7 percent this year. In the Silicon Valley,
year-over-year business service employment growth was running at a 21
percent rate a year ago but in July it actually declined 4.1 percent from a
- California’s construction picture was a bit
hazy in June. Residential construction, measured by permitted units, posted
a nearly 30 percent year-over-year drop, principally reflecting comparison
to last June’s abnormal burst of multifamily activity. In addition,
single-family construction fell for the fifth month in a row to its lowest
pace since May 1998. Nonetheless, during the first six months of 2001,
residential construction was up over 6 percent from the first half of 2000.
Construction in the volatile nonresidential sector dropped over 22 percent
from June 2000, measured by permit values.
- California’s real estate market was also
mixed in June. Statewide sales of single-family homes rose over the month
but were down 6.4 percent from a year ago. The state’s inventory index for
existing, single-family homes—the number of months needed to exhaust the
supply of homes on the market at the current sales rate—in June was 3.6
months, compared to 3.0 months a year ago. Despite weakening sales, the
statewide median price continued to climb, rising 9.8 percent above the June
- Home sales have slowed the most dramatically
in the San Francisco Bay area. Sales in San Jose—the Silicon Valley—fell
27 percent from a year ago, while home prices were nearly stagnant, rising a
meager 1.1 percent. In contrast, home sales and prices posted strong gains
in Southern California.
Computer Services Slowdown Hits Bay Area Hardest
Preliminary General Fund agency cash for July was
$174 million above the 2001 Budget Act forecast of $3.666 billion.
- Personal income tax revenues were $109 million
above the month’s forecast of $1.984 billion. Withholding receipts, which
were 2.3 percent above the year-ago level, were $103 million above the
month’s estimate of $1.879 billion. Other receipts were $36 million above
the projected level of $209 million and refunds were $30 million above the
estimate of $104 million.
- Sales and use tax receipts were $68 million
above the month’s forecast of $1.314 billion. Preliminary information,
however, indicates that this gain was offset by lower receipts in early
August. As a note, the final payment for second quarter taxable sales was
due at the end of July, and a portion of this payment is received in early
August. Thus, at this time the second quarter final payment appears to be
tracking the estimate.
- Bank and corporation tax revenues were $67
million below the month’s forecast of $214 million. July is not a key
month for this tax. The next significant month will be September when the
third estimated payment is due for calendar year corporations.
- Revenues from the insurance, estate, alcoholic
beverage, and tobacco taxes came in $3 million above the $124 million that
was expected. The remaining revenues—pooled money interest income and
"other" revenues—were $61 million above the month’s estimate
of $30 million, part of which could be due to cash flow factors.
General Fund Agency Cash
2001-02 Governor's Budget Forecast
2000-01 Comparison of Actual and 2001 Budget Act Forecast
Agency General Fund Revenues
For more information, please contact the California Department of Finance,
Room 1145, State Capitol, Sacramento, CA or call (916) 323-0648.
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