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The Humboldt County Economy in 2008
By Erick Eschker
Presented to Eureka Rotary Club
March 31, 2008
The Humboldt County Economy in 2008
By Erick Eschker
Department of Economics
Humboldt State University
Humboldt Economic Index
www.humboldt.edu/~indexhum
Humboldt Economic Index Sponsors
Six Sectors and Composite
• Energy
• Lumber-based manufacturing
• Employment
• Hospitality
• Retail
• Housing
• Composite
Is Humboldt County in a Recession?
• No decline in Retail or Employment
• Unemployment Rate up
• Overall Activity down due to:
–Lumber Manufacturing
–Housing sales
Retail• Based on our own survey (we’re always looking
for more data providers!)
The seasonally adjusted Retail Index is represented by the blue area in the graph above. The red line shows the four month moving average which attempts to demonstrate the overall trend in the data with less monthly volatility.
Retail Index (seasonally adjusted)
120
130
140
150
160
170
180
Employment• Very little change in overall employment• Unemployment rate has risen over the year
Housing
Composite• Decline since May• Housing and Lumber-Manufacturing the main reason
Forecast• Two local Leading Indicators show slowing
Concerns for Humboldt County
• Credit Crunch– “We are facing the most serious combination of
macroeconomic and financial stresses that the United States has faced in at least a generation, and possibly much longer than that.” Larry Summers, Economist, ex-Harvard President (March, 2008)
• State Budget Cuts– $16bil deficit– Humboldt County has higher percent government
workers than most counties
Concerns for Humboldt County
• Commercial Real Estate– “Banks with CRE concentrations should take
steps to strengthen their overall risk-management framework and maintain strong capital and loan loss allowances.” FDIC Chairman Sheila C. Bair
– This is potential problem for small/regional or California lenders
– FDIC to hire 60% more staff for anticipated bank failures
Concerns for Humboldt County• Residential Housing
–New Housing & Real Estate Index Webpage
Annual Appreciation of Inflation-adjusted Median House Price, Humboldt County
-20%
-10%
0%
10%
20%
30%
40%
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
Year
Pe
rce
nt
Source: Humboldt Economic Index
HousingWhat will happen to sales and prices
over the next few years?• More difficult to obtain a mortgage today
– Stated income, down payments, teaser rates
• Continued drop in Demand for housing– Prices and sales will fall
• Humboldt County appreciation has been similar to Central Valley, Southern California, and Northern California
Four-Quarter House Price Appreciation, OFEHO
-20%
-10%
0%
10%
20%
30%
2002
2003
2004
2005
2006
2007
Year
Appr
ecia
tion
Redding
Sacramento
San Francisco
San Jose
Santa Rosa
Twelve-Month House Price Appreciation, Case-Shiller
-20%
-10%
0%
10%
20%
30%
40%
Jan-
02
May
-02
Sep
-02
Jan-
03
May
-03
Sep
-03
Jan-
04
May
-04
Sep
-04
Jan-
05
May
-05
Sep
-05
Jan-
06
May
-06
Sep
-06
Jan-
07
May
-07
Sep
-07
Jan-
08
Year
Ap
pre
ciat
ion
Los Angeles
San Diego
San Francisco
Annual Appreciation of Median House Price and 12 month Moving Average, Humboldt County
-20%
-10%
0%
10%
20%
30%
40%20
02
2003
2004
2005
2006
2007
2008
Year
Per
cen
t
Source: Humboldt Economic Index
What are the Forecasts?
• Case-Shiller Housing futures contracts predict price drops of 23%, 18%, and 12% in Los Angeles, San Diego, and San Francisco over the next 4 ½ years
Foreclosures
• Foreclosures in Humboldt County have gone from record lows to record highs
The Humboldt County Economy in 2008
By Erick Eschker
Department of Economics
Humboldt State University
Humboldt Economic Index
www.humboldt.edu/~indexhum
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