For some time, California's employment
picture has conflicted with other positive economic signs. Throughout 2003,
the official employment estimates deteriorated in the face of a booming real
estate market, strong residential construction, and rising income tax withholding.
Recent revisions to 2003 employment estimates, however, bring the employment
picture more into line with these other signs and indicate that labor market
conditions may have improved during the latter half of 2003.
- California's nonfarm payroll employment estimates released in February incorporate
the yearly benchmark revision process. The relatively small revision reduced
the 2003 employment estimate by 43,500. More significantly, the downward revisions
predominantly affected the first half of the year, but left the year-end employment
level essentially unchanged. Thus, the revised numbers paint a more encouraging
picture of an upward employment trend leading into 2004. The original estimates
showed employment falling by 3,500 per month on average during the second
half of 2003, while the revised numbers indicate an average monthly gain
- Although the timing of the annual
revisions sometimes cloud the accuracy of the January industry employment
estimates, 2003 started off on a positive note with the addition of 22,200
nonfarm payroll jobs. The December-to-January gains were led by the Construction
and Leisure sectors, which each added 7,900 jobs. The Trade, Transportation,
and Utilities sector added 5,700 jobs; Education and Health Services, 4,600;
Information, 2,000; Professional and Business Services, 1,600; Other Services,
1,400; and Government, 700 jobs. Another positive note is that only three
major industries lost jobs in January. Resources and Mining lost 1,000 jobs;
Manufacturing, 2,900; and Financial Activity, 5,700.
- On a year-over-year basis, California
nonfarm employment rose by a scant 8,800 in January. This is, however, the
first year-over-year gain since December 2002. Employment expanded by 41,100
in Educational and Health Services; 36,200 in Professional and Business Services;
25,000 in Financial Activity; 22,300 in Construction; 11,700 in Leisure and
Hospitality; 11,200 in Trade, Transportation and Utilities. Industry employment
fell by 61,500 in Manufacturing; 59,000 in Government; 13,100 in Information;
3,100 in Other Services; and 2000 in Resources and Mining.
- There was mixed news for California's
unemployment rate in January, which dropped to 6.1 percent from a revised
6.5 percent in December 2003 (initially reported as 6.4 percent). The seasonal
adjustment factors used to make January estimates are larger than those for
other months, which means the January results are less precise. In January,
civilian employment rose by a questionably large 132,000. It is very unlikely
that actually was the case, since monthly employment gains averaged only 6,500
throughout 2002 and 2003. This gain is also out of proportion with the nonfarm
employment gains noted above. Thus, it is unlikely that unemployment was as
low as 6.1 percent in January.
- Persistently low home mortgage
interest rates and a limited supply of homes offered for sale are driving
a strong real estate market in California. Even though the pace of existing
home sales slowed slightly in January 2004 to 615,660 units at a seasonally
adjusted-annual rate, it was still over 5 percent faster than during January
- Not surprisingly, home prices continued their
ascent in January. The median price of existing single-family homes sold in
January reached $405,720, a nearly 21-percent increase from January 2003 and
the second consecutive month the median exceeded $400,000.
Industry Gains and Losses
Monthly Cash Report
Preliminary General Fund agency
cash for February was $252 million above the 2004-05 Governor's Budget forecast
of $3.836 billion. Year-to-date, revenues are $623 million lower than the $47.296
billion that was expected.
- Personal income tax revenues were $143 million below the month's forecast
of $1.283 billion. The shortfall was due to higher-than-expected refunds.
Refunds were $280 million above the projected level of $1.136 billion, but
since February is only the first of several significant months for 2003 tax
year refunds, it is not clear how much of this month's increase may be due
to cash flow. Withholding was $71 million above the estimate of $2.168 billion
and other payments were $66 million above the $251 million that was expected.
Year-to-date, personal income tax revenues are $393 million below the forecast.
- Sales and use tax receipts were $427 million above the month's forecast
of $2.147 billion. February cash includes the remaining portion of the final
payment for fourth quarter 2003 sales, which was due January 31. In addition,
the first prepayment for first quarter 2004 sales was due in February. Most
of the sales tax loss in January was made up in February. However, preliminary
information indicates fourth quarter sales were slightly below forecast. First
quarter receipts appear to be tracking. Year-to-date, sales tax revenues are
$130 million below the forecast.
- Corporation tax revenues were $1 million below the month's forecast of $172
million. Prepayments were $47 million below the estimate of $89 million and
other payments were $41 million above the forecast of $118 million. Refunds
were $5 million below the projected level of $82 million. Year-to-date, corporation
tax revenues are $58 million above the forecast. February is not a significant
month for this tax. March, however, is a critical collection month and will
provide a more meaningful measure since final payments for calendar year corporations
are due by mid-month.
- Revenues from the insurance, estate, alcoholic beverage, and tobacco taxes
came in $4 million below the $87 million that was expected. The remaining
revenues-pooled money interest income and "other" revenues-were
$27 million below the month's estimate of $147 million, primarily due to lower-than-anticipated
General Fund Agency Cash
2003-04 Governor's Budget Act Forecast
2003-04 Comparison of Actual and 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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