Explaining Southern California's economy

January jobs preview: We could be facing an ugly number

A jobs sign hangs above the entrance to

KAREN BLEIER/AFP/Getty Images

A jobs sign hangs above the entrance to the US Chamber of Commerce building in Washington, DC.

Friday morning, the Labor Department will release its jobs report for January. I'll be up at the crack of dawn in Southern California to write up the numbers when they hit, so join me in the darkness with a big cup of coffee or three.

The current U.S. unemployment rate is 7.8 percent. Private payrolls processor ADP, which generates an employment report ahead of the Labor Department, said that the country added 192,000 jobs in January.

Economists surveyed by Bloomberg expect 185,000. Both numbers are higher than what we wound up getting, on a preliminary basis, from the official government data in December: 155,000.

If ADP and the Bloomberg economist brain trust are right, then we're off to a decent start for 2013 — although to really push the unemployment rate lower in a hurry, we need to add 300-400,000 new jobs each month. 

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U.S. economy grows at a stronger pace in the third quarter

Labor Day Apparel - 12

Mae Ryan/KPCC

A worker moves finished fabrics at the Antex Corporation warehouse, which has operated in Los Angeles since 1973. Overal economic activity in the U.S. grew by a better-than-originally-estimated 3.1 percent in the third quarter.

The U.S. economy expanded at a pace of 3.1 percent in the third quarter, according to revised data released Thursday by the U.S. Commerce Department.

The growth in third quarter real GDP — the total economic output of the U.S. economy — has been revised up steadily since earlier this year. Today's 3.1 percent is more than full percentage point higher than the initial assessment of the economy by the Bureau of Economic Analysis. A second revision also pushed the number higher, to 2.7 percent.

In a nearly $16 trillion economy, there's a major difference between growing at 2 percent and growing at over 3 percent.

Economists have recently argued that 2 percent U.S. GDP growth could be a new normal for the economy as it emerges from the Great Recession. Historically, the economy has grown at a faster rate. But last year, it expanded at only a 1.7 percent annual pace, and since the financial crisis, it hasn't seen quarters in which GDP has grown at the typically 5-6 percent pace a recovering economy usually enjoys.

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The gruesome tale of declining U.S. economic growth

Scott Olson/Getty Images

Workers build a Jeep Compass at the Chrysler assembly plant in Belvidere, Ill. U.S. growth continues to contract despite a good performance by the auto industry.

There were plenty of reasons to be optimistic about the U.S. economy at the tail end of last year. On balance, the year had been pretty miserable, growth-wise, up to that point: gross domestic product grew less than two percent. But the fourth quarter came in at double that, a surprising 4 percent. The stage was set for some real if not spectacular economic recovery in 2012.

The first quarter initially looked good, as we started to add 200,000-plus jobs. But when the GDP numbers started to roll in, we could see a repeat of an old pattern: the year begins with promise, only to hit headwinds by spring. In 2011, in was the Japanese earthquake and tsunami, a spike in oil costs, and the debt-ceiling battle and ensuing U.S. credit downgrade by S&P that smothered progress. This year, it's been ongoing troubles in Europe, plus a hot summer and drought that damaged agriculture, which had been one of the unsung stars of the recovery.

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3 reasons why you don't want to buy a house in Southern California right now

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A construction worker on the top of a home under construction at a new housing development in Petaluma, California. Sales of new homes have been rising, as have prices. Meanwhile, interest rates are low. But that doesn't mean it's a good time to buy.

The Commerce Department released data on August new homes sales today. Bottom line: sales were flat from July to August, but well up over last year: 18 percent. That sounds great, but there are several other factors to take into account. First, the latest Case-Shiller index provides strong evidence that housing prices in the U.S. are forming a bottom (don't get too excited — we're only back to 2003 levels, even with hard-hit regions like Phoenix posting double-digit price gains). 

Second, housing inventory in Southern California is tight. The supply of foreclosures coming to market is being reduced, and during the downturn, homebuilders didn't do much building.

Third, that lack of supply is colliding with a surge in demand, as buyers decide to take advantage of low prices and historically low interest rates. The interest rates are the Federal Reserve's doing; the central bank wants people to buy houses and bid up prices to get the housing market back on its feet and restore equity appreciation to borrowers who now owe more on their mortgages than their homes are (for the time being) worth.

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Can we really get excited about 0.2 percent better GDP growth?

Northwest Connecticut Hit Hard By Economic Slowdown

Spencer Platt/Getty Images

A closed factory sits in Waterbury, Connecticut. The government has revised up U.S. GDP growth numbers for the second quarter, but GDP continues to be weak.

Under the circumstances, we should take it. The Commerce Department just revised up second quarter U.S. GDP growth to 1.7 percent from 1.5 percent.

If you're keeping score at home, this means that in the second quarter of 2012, the U.S. economy grew at a rate that matches expansion in the whole of 2011 — a rate that was considered abysmal at the end of last year, in the context of a fourth quarter in 2011 that saw GDP growth of 4.1 percent.

I like to keep an eye on GDP as it relates to unemployment, which is currently at 8.3 nationally, higher in California and L.A. Growth at 1.7 percent — or anything under 2 percent, really — isn't enough to make much of a dent there. In order to get nearly 13 million unemployed Americans back to work, we need to add 350-400,000 new jobs each month. We're doing less than 100,000 these days, after starting the year at about 200,000-per-month pace. 

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