Full text of Western Economic Developments : May 1996

View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Federal Reserve Bank of San Francisco

WESTERN ECONOMIC DEVELOPMENTS
May 1996
Executive Summary
The Twelfth District continued on a solid
economic growth path in the first quarter of
1996. As of March, District employment
was 2.6 percent above its year-earlier level,
and growth during the first quarter of 1996
was slightly above that pace.
California continued on a moderate growth
path, as did Idaho, and the Washington
economy is improving after a somewhat
weak 1995. Rapid expansion continued in
most of the remaining District states, with
the exceptions of Hawaii and Alaska.
The semiconductor and computer manufacturing industries, along with related sectors, play an important role in the District
economy. Despite the recent substantial
slowdown in semiconductor sales, the prospects for these industries remain favorable.
During the first quarter of 1996, loan growth
at a sample of large District banks accelerated compared to the last quarter of 1995,
and growth in April was close to the first
quarter pace. Accelerating real estate loan
growth is offsetting slower business loan
growth in several states, including California.

District Update
During the first quarter of 1996, the District
economy continued to expand at the solid pace
established in mid-1995. As of March, District
payroll employment was 2.6 percent above its
year-earlier level, and growth during the first
quarter of 1996 was slightly above that pace.
California performed well, expanding 1.9 percent at a yearly pace during the first quarter of
1996; this is slower than in the second half of
1995, but it probably is an underestimate of
actual job growth. Consistent with solid growth
in the state, reports indicate reduced migration
of Californians to Oregon, a fast-growing neighbor state.
Elsewhere, the Washington economy is improving after a somewhat weak 1995, with a particularly strong showing in March, and Idaho continues its moderated expansion. Although lingering weakness was evident in Hawaii and to a
lesser extent Alaska, rapid expansion continued
in Nevada, Utah, and Oregon. Employment
growth in Arizona has accelerated to a rapid rate

Nonagricultural Payroll Employment
(percent change over year earlier)
3.5

Twelfth
District

3
2.5
2
1.5
1

U.S.

0.5
0
-0.5
Dec

Apr
1993

Aug

Dec

Apr
1994

Aug

Dec

Apr
Aug
1995

Dec

Mar
1996

Western Economic Developments is produced twice quarterly by the Banking and Regional Studies Section of the Economic Research Department. The analyses represent
the views of the staff and do not reflect the official views of the senior bank management of the Federal Reserve Bank of San Francisco or the Federal Reserve System. Western
Economic Developments is prepared by the Economic Research Department and distributed by the Public Information Department, (415) 974-2163.

MAY 1996

WESTERN ECONOMIC DEVELOPMENTS

after slowing somewhat during the middle of
1995; however, loan growth in that state has
weakened.
District growth continues to be led by the construction, service, and trade sectors, with particularly fast growth in the wholesale component of the latter. The activity in the wholesale
sector and District international trade reflects in
part the expansion of manufacturing in the District. Rapid manufacturing expansion in highwage sectors has manifested itself in substantial
manufacturing wage gains in several states. For
example, a large and growing share of District
employment is in semiconductor and computer
manufacturing and related activities.

Bay Area) has long been the nation’s leading
area for the development and production of semiconductors and computers. In Southern California, Los Angeles and Orange Counties also produce significant amounts of these products, as
do other areas in California and several other
states in the District—notably Oregon, Washington, Idaho, and Utah.

District Employment by Industry

Recent Developments in the Semiconductor
and Computer Industries
The national semiconductor industry recently
has experienced a sharp downturn in its key
sales indicator. This has raised concerns about
the health of that industry, and also the health of
the computer industry—particularly the segment that produces desktop computers for home
and business use. These industries play important roles in the District economy, due to their
share of output and employment, and the often
high-wage jobs that they provide. This is particularly true in California, where Silicon Valley (in the southern part of the San Francisco

District Employment by State
Number Employed
(thousands)

Annualized
% Change
From
Month
Ago

%
Change
From
Year
Ago

Mar-96

Feb-96

Mar-95

21,362
81

21,325
81

20,816
81

2.1
-4.3

2.6
-0.6

Construction
Manufacturing

992
2,825

999
2,819

936
2,793

-7.6
2.9

6.1
1.2

Transportation
Trade
F.I.R.E.

1,096
5,109

1,096
5,096

1,082
4,973

1,216
6,368

1,215
6,345

1,207
6,077

0.8
2.9
1.7

1.3
2.7
0.8

4.6

4.8

3,632

3,631

3,623

0.3

0.2

Total
Mining

Services
Government

Seasonally adjusted payroll employment data.

%
Change
From
Year
Ago

Feb-96

Mar-95

263
1,839

265
1,835

261
1,773

-6.6
2.7

1.0
3.7

California
Hawaii

12,630
529

12,622
531

12,349
536

0.8
-3.1

2.3
-1.2

Idaho
Nevada
Oregon
Utah
Washington
District
Rest of U.S.

487
832
1,459
943
2,379
21,362
96,658

486
827
1,454
938
2,369
21,325
96,517

475
776
1,403
896
2,348
20,816
95,486

4.5
7.7
4.4
6.9
5.3
2.1
1.8

2.5
7.3
4.0
5.3
1.3
2.6
1.2

118,020

117,842

116,302

1.8

1.5

U.S.

Annualized
% Change
From
Month
Ago

District Manufacturing and Construction Indicators

Mar-96
Alaska
Arizona

Number Employed
(thousands)

Aerospace Employment
(1992=100)
Electronics Employment
(1992=100)
U.S. Semiconductor Orders
($ Million)
Non-Residential Awards
(1992=100)
Residential Permits
(Thousands)
Western Housing Starts
(Thousands)

%
Change
From
Year
Ago
-7.7

Mar-96
61.2

Feb-96
62.7

107.2

107.1

99.4

0.1

7.9

3330.0

3900.0

3910.0

-14.6

-14.8

101.2
25910.4
23.9

Mar-95
66.3

%
Change
From
Previous
Month
-2.4

113.1

136.7

-10.5

-25.9

26379.1

21427.0

-1.8

20.9

24.2

-1.2

Seasonally adjusted payroll employment data.

FEDERAL RESERVE BANK OF SAN FRANCISCO

MAY 1996

WESTERN ECONOMIC DEVELOPMENTS

Recent Industry Performance at the National
Level
The magnitude of the semiconductor downswing
at the national level is depicted in the chart,
which shows monthly values of the U.S. “bookto-bill” ratio (seasonally adjusted and provided
by the Semiconductor Industry Association).
U.S. “book-to-bill” is the ratio of semiconductor
orders to shipments, from U.S. manufacturers to
U.S. purchasers. It is a commonly used indicator
of short-term domestic semiconductor industry
conditions.
After climbing to unusually high levels in the
first half of 1995, the book-to-bill declined slowly
in the second half of 1995, and then dropped
precipitously during January-March of this year.
Both the orders and shipments components of
the ratio dropped over this period. Concurrent
with this was substantial inventory accumulation at semiconductor and computer manufacturing plants.
However, the book-to-bill ratio may overstate
the decline in quantity demanded because it is
contaminated by price changes. In particular,
when memory prices are declining, new orders
are placed at lower prices than existing shipments, so that even with constant quantities sold
the ratio will decline.

Such price changes have occurred over the recent episode of book-to-bill decline. Prices for a
basic unit of standard computer memory—Dynamic Random Access Memory, or “DRAM”—
declined slightly (approximately 4 percent) between December 1995 and February 1996, and
then dropped sharply in March (by approximately 30 percent). Because the large price decline lagged behind the initial large decline in
book-to-bill by several months, the price declines do not appear to fully explain the declining book-to-bill—i.e., the reduced book-to-bill
is not entirely due to supply-driven decreases in
the price of semiconductors.
The sharp downturn in semiconductors was interpreted by some observers as boding poorly for
computer sales in 1996, because use in computers accounts for an estimated 60 percent of the
semiconductor market. To date, however, little
or no downturn in computer industry indicators
has been observed. The next chart shows the
value (at 1992 prices) of monthly computer orders and shipments at the national level for the
period from January 1993 to March 1996. No
slowdown is apparent. Furthermore, business
investment expenditures on computer equipment
(not shown) accelerated in the first quarter of
1996, after a very strong 1995.

Manufacturers' New Orders and Shipments

Book-to-Bill Ratio
1 .2 5

Computer Office Equipment
Seasonally Adjusted Monthly, 1/93-3/96

1 .2

1 .1 5

11
1 .1

10
1 .0 5

$Bil

0 .9 5

0 .9

7
Orders

0 .8 5

Shipments

6
0 .8

5
Jan-93

0 .7 5
Ja n-93

M ay-93 S ep -93

Ja n-94

M ay-94 S ep -94

Ja n-95 M ay-95 S ep -95

May-93

Sep-93

Jan-94

May-94

Sep-94

Jan-95

May-95

Sep-95

Jan-96

Ja n-96

FEDERAL RESERVE BANK OF SAN FRANCISCO

WESTERN ECONOMIC DEVELOPMENTS

Explanation of the Semiconductor Glut
The patterns identified above suggest that sales
of computers and semiconductors are not necessarily tightly linked over short periods of time.
In general, the semiconductor industry is subject
to sharper swings than is the computer industry.
This arises due to the increasingly large investments and long lead times needed until semiconductor manufacturing plants reach efficient operating capacity. Combined with rapid expansion of worldwide semiconductor markets, this
causes new capacity to be built based on expected industry growth, in an uncertain environment. Overestimation of this growth leads to
periods of excess capacity and overproduction.
The resulting market glut manifests itself in
rising inventories at semiconductor and computer firms, falling semiconductor prices, and
reductions in the quantity and value of orders.
It appears that these normal industry cyclical
pressures were present in the recent semiconductor downturn, along with several other important elements. Memory chip prices were very
high during 1992-95, as growth in worldwide
demand outstripped supply; this caused computer makers to conserve somewhat on memory.
A change occurred with the introduction of
Windows ’95 in mid-1995, which requires more
memory than earlier operating systems. Resulting growth in memory chip sales was expected
to be particularly strong, and semiconductor and
computer firms planned accordingly.
However, sales of Windows ’95 were not as
strong as some computer and semiconductor
makers expected, nor was growth in related
hardware sales. In addition, substantial new semiconductor capacity came on-line worldwide
during 1995, and new chip technology became
available recently, which rapidly supplanted the
old technology and led to excess inventories on
the latter. The net effect of these factors was a
substantial glut in the semiconductor market,
without any apparent slowing in computer sales.
The resulting excess inventories of semiconductors were substantial, but industry analysts expect them to be fully eliminated by the middle of
this year.

MAY 1996

Changing Computer and Semiconductor Employment in the District
Precise data on the contribution of these sectors
to District output and income are not available.
The best available data are payroll employment
data for several detailed industry sectors.
In California, a large number of jobs are in the
“computer and office equipment” and “electronic components and accessories” sectors.
These are Standard Industrial Classification
(SIC) industries 357 and 367; semiconductors
are a large share of the latter. As of March 1996,
the state had over 200,000 jobs in these two
categories, which is almost 2 percent of total
payroll employment. Employment in both industries grew rapidly over the past year, at a 5
percent rate for computer employment and 8
percent rate for electronic components employment. However, slowing occurred in the first
quarter of 1996, to 1.9 percent in computers and
7 percent in electronic components (both at an
annualized rate).
Furthermore, in California the electronics sector
as a whole (SIC 36) grew more slowly over the
past year, but slowed less in the first quarter,
than did its components sub-sector (SIC 367).
This is consistent with the recent pattern in
semiconductor output growth, which was very
rapid during 1995 but slowed substantially in
early 1996. This pattern in semiconductor output likely had a more pronounced effect on
employment in the narrower electronic components sector (SIC 367), in which semiconductor
manufacturing accounts for a large output share,
than in the broad category (SIC 36), where it
accounts for a smaller output share.
Available figures reveal a similar pattern in
Washington and Oregon. Growth in computer
employment and electronics employment was
rapid over the past year but slowed in the first
quarter of 1996. The same is true for the electronics sector in Utah. In contrast, electronics
employment growth in Idaho accelerated over
the same period.

FEDERAL RESERVE BANK OF SAN FRANCISCO

MAY 1996

WESTERN ECONOMIC DEVELOPMENTS

Assessment

In April, loan growth for the District excluding
Nevada (where credit card institutions substantially distort consumer loan figures) was slightly
lower than during the first quarter.

The semiconductor market slowdown nationally has not yet been reversed; the preliminary
April “book-to-bill” figure is approximately at
the low level established in March. This slowdown appears to have affected the computer and
electronics sectors in the District. Employment
growth in these sectors slowed in several states
early in 1996.
As noted, however, the semiconductor glut is
expected to be temporary, and no slowdown in
computer sales has been observed to date. Substantial competitive pressure from domestic and
international sources will continue in these industries, which may affect the growth of specific firms in some states. However, these sectors as a whole should continue to be a source of
strength for the District economy.
Financial Conditions
Total bank lending (adjusted for loan sales and
reclassifications) accelerated in most states in
the District in the first quarter, according to a
survey of large banks. A resumption of growth
in real estate loans, following cutbacks during
the second half of last year, contributed to the
pickup, as did acceleration in consumer loan
growth. In contrast, business loan growth declined to its lowest level since the fall of 1993.

In California, the annualized rate of adjusted
loan growth averaged 8.6 percent in the first
quarter of 1996, down only slightly from the
fourth quarter’s 9.0 percent pace, but well below last summer’s peak of 18.7 percent. A
decline in business loan growth in the first
quarter contributd to the slight cutback in total
lending. However, real estate loans grew solidly
in the first quarter, following a contraction in
the fourth quarter of last year. In April, annualized loan growth increased somewhat, to 10.7
percent.
Like California, but in contrast to the District as
a whole, Arizona is showing a slowdown in
lending. Adjusted loan growth in Arizona declined to an average annualized rate of 9.1
percent in the first quarter, from 12.4 percent in
the fourth quarter of last year. In April, loan
growth decreased again, to 7.6 percent at an
annual rate. A decline in real estate loan growth
in the first quarter contributed to the slowdown.
In addition, business lending contracted in the
first quarter, following robust growth during the
second half of last year, and consumer loans
outstanding continued to decline.

Total Loan Growth
District Banking Indicators

Large Commercial Banks
Seasonally Adjusted

Percent

Apr-96

Mar-96

Apr-95

Annualized
% Change
From
Month
Ago

Total Loans
Commercial
Real Estate

238.9
52.0
120.3

236.1
52.1
119.6

220.1
47.6
114.6

15.6
-2.9
7.6

8.5
9.2
5.0

Consumer
Total Deposits

37.8
245.5

36.2
243.5

36.3
235.5

66.7
10.7

4.1
4.3

20.6
40.8
89.5

20.7
41.6
88.2

15.9
39.6
86.8

-7.9
-19.6
20.0

29.7
3.0
3.1

-5

Large Time
Small Time
MMDAs / Savings

%
Change
From
Year
Ago

District less California

20
15
10
5

California

-10

Figures in billions of dollars, seasonally adjusted
-15
Apr
1992

FEDERAL RESERVE BANK OF SAN FRANCISCO

Aug

Dec

Apr Aug
1993

Dec

Apr Aug
1994

Dec

Apr Aug
1995

Dec

Apr
1996

MAY 1996

WESTERN ECONOMIC DEVELOPMENTS

ALASKA, OREGON, AND WASHINGTON
In Alaska, the number of jobs in March was up
1 percent from a year earlier, despite a net
decline between November and March. Mining,
construction and manufacturing employment
have been volatile in recent months; although
all three sectors suffered significant job declines in March, each expanded overall during
the past year. The slowing in construction employment growth is likely to continue. Residential permits declined sharply in the first quarter
after increasing during the second half of 1995,
and non-residential construction awards remain
at low levels. In contrast, yearly growth in
service employment was at a relatively robust
2.8 percent in March, although this rate has
slowed substantially over the past year.
Recent legislation has improved the outlook for
the state’s oil industry. In April, the federal
government gave formal clearance for exportation of Alaskan North Slope crude oil, ending a
ban imposed in 1973. The U.S. Energy Department expects a significant increase in Alaskan
oil production, which will improve revenue
flows to the state government.
Labor markets in Oregon remain strong. The
state posted a steady gain in March, and the
number of jobs is 4.0 percent above its year-

Nonagricultural Payroll Employment
(percent change over year earlier)
5.0
4.5

4.0
3.5
3.0
2.5
2.0

U.S.

1.5

1.0
0.5

0.0
Dec

Apr
1993

Aug

Dec

Apr
1994

Aug

Dec

Apr
1995

Aug

Dec Mar
1996

earlier level. Construction employment fell
sharply in March, but this only partially offsets
large increases in January and February. Employment growth in the trade and service sectors
also accelerated in the first quarter of 1996, and
the state unemployment rate has been lower than
its national counterpart for 30 consecutive
months.
Slowed domestic migration to the state should
help to keep unemployment low, although it may
also reduce employment growth. The number of
out-of-state driver’s licenses exchanged during
March was reportedly down 1.5 percent overall
relative to a year earlier, and down 12 percent for
transfers from California to Oregon. Elsewhere,
a survey of automobile dealers in the Portland
area indicates that sales are slowing. The recent
spike in gasoline prices may temporarily exacerbate this, since trucks with low gas mileage
constitute a significant share of sales in the state.
Economic conditions in Washington appear to
be improving after a somewhat slow 1995. Payroll employment recorded strong gains in February and March, and the March figure is 1.3
percent above its year earlier level. Every major
sector added to payrolls in March, and the construction, service, and finance sectors registered
strong job gains between the fourth quarter of
1995 and the first quarter of 1996. Although state
manufacturing employment has been declining,
Boeing announced in April that it plans to hire
6,700 workers in Washington state this year.
Current estimates indicate that Boeing will produce 215 planes in 1996, 318 in 1997, and 370 in
1998, compared to 206 in 1995.
Federal funding cuts and restructuring efforts at
the Hanford nuclear facility have weakened economic conditions in the southeastern part of the
state. In March, Hanford-related employment
was down 18.2 percent from its year-earlier
level. As a result of the Hanford layoffs, the state
Revenue Department recently designated the area
as distressed, which enables the use of special
tax incentives to attract new business and support growth at existing firms.

FEDERAL RESERVE BANK OF SAN FRANCISCO

MAY 1996

WESTERN ECONOMIC DEVELOPMENTS

CONSTRUCTION
Non-Residential Construction Awards

Residential Construction Permits
1992=100
275

1992=100
375

OR
250
325

AK
225

275

200
175

225

150
175

125
WA

125

100
75
WA

75
50
25

25
Dec

Apr

Aug

Dec

Apr

Aug

Dec

1995
1994
Data are seasonally adjusted three month moving averages.

Dec

Mar
Jun
Sep
Dec
Mar
Jun
1994
1995
Data are seasonally adjusted three month moving averages.

Apr
1996

Sep

Dec

Mar
1996

EMPLOYMENT
Number Employed
(thousands)
Mar
Feb
Mar
'96
'96
'95
Alaska
Total
Mining
Construction
Manufacturing
T.C.P.U.
Trade
F.I.R.E.
Services
Government
Oregon
Total
Mining
Construction
Manufacturing
T.C.P.U.
Trade
F.I.R.E.
Services
Government

Annualized
% Change
From
Month
Ago

%
Change
From
Year
Ago

263.2
10.1
12.4
17.7
22.8
54.6
11.6
61.4
72.6

264.7
10.3
12.9
19.1
23.2
54.4
11.6
61.0
72.2

260.7
10.0
12.3
16.9
23.4
53.7
11.7
59.7
73.0

-6.6
-21.0
-37.8
-59.9
-18.8
4.5
0.0
8.2
6.9

1.0
1.0
0.8
4.7
-2.6
1.7
-0.9
2.8
-0.5

1,459.0
1.9

1,453.8
1.9

1,402.8
1.8

4.4
0.0

4.0
5.6

72.7
231.9
72.8
368.6
89.2
386.5
235.4

73.4
230.3
72.7
366.9
88.7
385.2
234.7

65.8
227.4
70.7
355.5
86.3
357.0
238.3

-10.9
8.7
1.7
5.7
7.0
4.1
3.6

10.5
2.0
3.0
3.7
3.4
8.3
-1.2

Number Employed
(thousands)
Mar
Feb
Mar
'96
'96
'95
Washington
Total
Mining
Construction
Manufacturing
T.C.P.U.
Trade
F.I.R.E.
Services
Government

2,378.8
3.2
125.2
332.6
121.8
586.4
123.4
639.6
446.6

2,368.5
3.2
123.2
332.0
120.8
584.9
122.9
636.5
445.0

2,347.7
3.4
123.9
340.0
119.3
580.5
121.3
614.9
444.4

Annualized
% Change
From
Month
Ago
5.3
0.0
21.3
2.2
10.4
3.1
5.0
6.0
4.4

%
Change
From
Year
Ago
1.3
-5.9
1.0
-2.2
2.1
1.0
1.7
4.0
0.5

Unemployment Rates (%)
Mar

Feb

Jan

Mar

Feb

'96

'95

Alaska
Oregon
Washington

7.9
5.1
6.1

7.5
4.9
6.0

7.7
4.9
5.9

7.3
4.6
6.3

7.4
4.7
6.4

U.S.

5.6

5.5

5.8

5.5

5.4

Unemployment rates are from the household employment survey, all other data are for nonagricultural payroll employment.
All data are seasonally adjusted.

FEDERAL RESERVE BANK OF SAN FRANCISCO

MAY 1996

WESTERN ECONOMIC DEVELOPMENTS

ARIZONA, CALIFORNIA, AND HAWAII
After slowing in the middle of 1995, employment growth in Arizona averaged almost 6 percent at an annual rate during November 1995
through March 1996, and the unemployment
rate hovered below 5 percent over the same
period. Most of the recent job gains have been in
the trade and services sectors. Within the trade
sector, wholesaler activity and job growth has
been strong, owing partly to a pickup in manufacturing production in the state, and recent
rapid expansion in retail employment has been
propelled in part by rapid population growth
during the past few years.

start-up firms, seasonal adjustment difficulties—
due to the large weather-related disruptions last
year—appear to have distorted the recent
monthly data and exaggerated a reported decline in construction employment since January. Among other indicators of building activity, residential permits are not declining but
remain relatively low, and there has been some
slowing of nonresidential construction awards.
The civilian unemployment rate has edged down
since late 1995, as has the rate of job loss as
measured by initial claims for unemployment
insurance payments.

U.S. Census Bureau figures indicate a 15 percent gain in Arizona’s population between 1990
and 1995. More than half of this increase was
due to the migration of residents from other U.S.
states, while immigration from abroad played a
smaller role. Arizona has a large and increasing
number of elderly residents, which is boosting
the demand for medical services in the state.

The degree of labor market slack differs across
subregions of the vast state. In the San Francisco
Bay area, the civilian unemployment rate is
declining and now is below 5 percent, compared
to about 6 percent in San Diego and 7.5 percent
in the greater Los Angeles area. Los Angeles’
still-struggling economy now faces additional
restraint from disruption of trucking activity
due to a labor dispute at the Ports of Los Angeles
and Long Beach. On the brighter side for that
region, orders for McDonnell Douglas civilian
aircraft picked up sharply in late 1995 and remained healthy in the first quarter of this year.

Economic growth in California continues to
outpace that in the nation as a whole. Estimated
state payroll employment growth in February
and March averaged 2 percent at an annual rate,
which is below the revised 1995 pace but probably is an underestimate of actual job growth. In
addition to a likely undercount of jobs created in

Nonagricultural Payroll Employment
(percent change over year earlier)
8.0
AZ

7.0
6.0
5.0
4.0
3.0
U.S.
2.0

1.0
0.0
HI

-1.0

The deterioration in general economic conditions in Hawaii appears near an end, but official
labor market indicators do not yet show recovery, and other indicators of economic health are
mixed. Payroll employment has been essentially constant in recent months, after falling
about 1.5 percent in 1995. Two upbeat indicators are a strong increase in tourism traffic and
improved retail sales growth in recent months.
However, the recent jump in jet fuel prices is a
downbeat development that likely will increase
the cost of traveling to Hawaii, at least temporarily. Official labor market indicators show the
unemployment rate holding steady at 6 percent,
which is high given the prevalence of multiple
job-holding in the Hawaiian labor market.

-2.0
Dec

Apr
1993

Aug

Dec

Apr
1994

Aug

Dec

Apr
1995

Aug

Dec

Apr
1996

FEDERAL RESERVE BANK OF SAN FRANCISCO

MAY 1996

WESTERN ECONOMIC DEVELOPMENTS

CONSTRUCTION
Residential Construction Permits

Non-Residential Construction Awards
1992=100
225

1992=100
225

200

175

150

125

100

50
HI

Dec
Apr
Aug
Dec
Apr
Aug
1994
1995
Data are seasonally adjusted three month moving averages.

Dec

Apr
1996

Dec
Mar
Jun
Sep
Dec
Mar
Jun
1994
1995
Data are seasonally adjusted three month moving averages.

Sep

Dec

Mar
1996

EMPLOYMENT
Number Employed
(thousands)
Mar
Feb
Mar
'96
'96
'95
Arizona
Total
Mining
Construction
Manufacturing
T.C.P.U.
Trade
F.I.R.E.
Services
Government

1,839.2
12.5
122.2
197.4
88.2
460.9
108.2
542.8
307.0

California
Total
Mining
Construction
Manufacturing

12,630.1
28.8
496.9
1,806.4

T.C.P.U.
Trade
F.I.R.E.
Services
Government

631.5
2,985.1
734.8
3,847.0
2,099.6

1,835.1
12.4
124.6
197.3
88.2
457.0
108.1
540.7
306.8

Annualized
% Change
From
Month
Ago

%
Change
From
Year
Ago

1,773.2
12.2
117.6
191.2
86.3
444.8
107.3
516.7
297.1

2.7
10.1
-20.8
0.6
0.0
10.7
1.1
4.8
0.8

3.7
2.5
3.9
3.2
2.2
3.6
0.8
5.1
3.3

12,621.5 12,349.3
29.0
30.3
503.7
474.6
1,803.9
1,786.6

0.8
-8.0
-15.0
1.7

2.3
-5.0
4.7
1.1

-0.6
0.4
0.3
4.4
-1.0

0.6
2.5
-0.3
4.6
-0.2

Number Employed
(thousands)
Mar
Feb
Mar
'96
'96
'95
Hawaii
Total
Mining
Construction
Manufacturing
T.C.P.U.
Trade
F.I.R.E.
Services
Government

Annualized
% Change
From
Month
Ago

%
Change
From
Year
Ago

529.2

530.6

535.5

-3.1

-1.2

24.7
16.5
40.7
134.8
37.1
165.3
110.1

24.9
16.7
40.8
134.9
37.3
165.7
110.3

26.9
16.9
40.7
136.1
37.4
165.0
112.5

-9.2
-13.5
-2.9
-0.9
-6.2
-2.9
-2.2

-8.2
-2.4
0.0
-1.0
-0.8
0.2
-2.1

Mar
'96

Feb
'96

Jan
'96

Mar
'95

Feb
95

Arizona
California
Hawaii

4.9
7.6
5.9

4.9
7.7
5.9

4.8
7.6
5.8

5.3
7.7
5.6

5.3
7.7
5.7

U.S.

5.6

5.5

5.8

5.6

Unemployment Rates (%)

631.8
2,984.0
734.6
3,833.1
2,101.4

628.0
2,910.9
737.0
3,678.9
2,103.0

Unemployment rates are from the household employment survey, all other data are for nonagricultural payroll employment.
All data are seasonally adjusted.

FEDERAL RESERVE BANK OF SAN FRANCISCO

MAY 1996

WESTERN ECONOMIC DEVELOPMENTS

IDAHO, NEVADA, AND UTAH
The Idaho economy continues to expand at the
moderated pace established in the middle of
1995. Yearly growth in payroll employment was
2.5 percent as of March, with a substantial increase in that month after weak growth in January and February. The March surge helped to
hold the unemployment rate around 5 percent,
where it has been since declining from 5.4 percent in December. Recent employment growth
has been led primarily by growth in construction
and durable manufacturing. State manufacturing strength is also reflected in a remarkable 14
percent increase in average manufacturing wages
during the past year. In contrast, both the government and finance sectors have experienced
employment declines of late.
Conditions are mixed in the state’s construction
and real estate sectors. Commercial construction activity and construction and sales of single
family homes remain high. However, both the
multi-family residential market and the rental
market have softened noticeably, with vacancy
rates that have increased to levels several points
higher than the nationwide average.
Nevada’s employment growth rate has been the
fastest in the nation for several years now. As of
March, annual state payroll employment growth
stood at 7.3 percent, and the unemployment rate
dropped to 4.6 percent after hovering around 5
Nonagricultural Payroll Employment
(percent change over year earlier)
12

8
UT
6

ID
U.S.

0
Apr
1993

Aug

Dec

Apr
1994

Aug

Dec

Apr
1995

Aug

Dec

Apr
1996

percent since October. Employment in the trade
and finance sectors surged in March, but the
government sector, which grew at 3.1 percent in
the 12 months leading to March, lost jobs in
February and March after a substantial gain in
January. Overall employment growth has been
broad-based over the past year, and average
manufacturing wages increased by 7.8 percent
during the past year.
The strongest job gains continue to be in construction, where employment grew 18.4 percent
during the 12 months ending in March. Residential construction has accelerated in recent
months, and recent commercial developments
in Las Vegas include the opening of an elaborate hotel/casino and plans for two more major
hotel/casinos to open later this year. Additional
new commercial projects valued at more than
$2 billion are scheduled to be completed in Las
Vegas by 1998.
Rapid economic expansion also continues in
Utah. Yearly employment growth as of March
was 5.3 percent. After some slowing around the
turn of the year, employment growth was strong
in February and March, led by large gains in the
construction, durable manufacturing, and finance sectors. The gains in durable manufacturing employment came largely from the industrial machinery and electronics sectors, which
for now helps to mitigate concerns that these
sectors would be hit hard by the glut in the
national semiconductor market.
One concern in the state is over the very tight
labor market. The unemployment rate recently
declined from an already very low 3.5 percent in
October to nearly 3 percent during DecemberMarch. Employers face substantial constraints
in hiring workers. Population growth in the
state has been rapid, but is being fueled as much
by high birth rates as by in-migration of workers, and California’s economic recovery is likely
to slow the latter. Despite these concerns, manufacturing wage growth was a solid but not remarkable 4.4 percent for the 12 months ending
in March.

FEDERAL RESERVE BANK OF SAN FRANCISCO

MAY 1996

WESTERN ECONOMIC DEVELOPMENTS

CONSTRUCTION
Non-Residential Construction Awards

Residential Construction Permits

1992=100
400

1992=100
300
NV

350
250

ID
300

200

250
UT

200

150

150
100
100

50
Dec

Apr
Aug
Dec
Apr
Aug
1994
1995
Data are seasonally adjusted three month moving averages.

Dec

Apr
1996

Jan

Apr Jul Oct Jan Apr Jul Oct Jan
1994
1995
Data are seasonally adjusted three month moving averages.

Apr

Jul

Oct

Jan
1996

EMPLOYMENT
Number Employed
(thousands)
Mar
Feb
Mar
'96
'96
'95

Annualized
% Change
From
Month
Ago

%
Change
From
Year
Ago

Idaho
Total
Mining
Construction
Manufacturing
T.C.P.U.
Trade
F.I.R.E.
Services
Government

487.4
2.9
32.4
73.0
23.3
123.2
23.7
113.7
95.2

485.6
2.9
32.1
72.0
23.5
123.2
23.9
113.1
94.9

475.4
2.7
29.5
71.9
22.7
120.6
24.2
108.3
95.5

4.5
0.0
11.8
18.0
-9.7
0.0
-9.6
6.6
3.9

2.5
7.4
9.8
1.5
2.6
2.2
-2.1
5.0
-0.3

Nevada
Total
Mining
Construction
Manufacturing

832.1
13.5
70.0
38.8

827.0
13.5
70.0
38.7

775.6
12.9
59.1
36.0

7.7
0.0
0.0
3.1

7.3
4.7
18.4
7.8

T.C.P.U.
Trade
F.I.R.E.
Services
Government

42.1
168.1
38.0
362.5
99.1

42.0
165.6
37.6
360.2
99.4

40.1
153.9
34.9
342.6
96.1

2.9
19.7
13.5
7.9
-3.6

5.0
9.2
8.9
5.8
3.1

Number Employed
(thousands)
Mar
Feb
Mar
'96
'96
'95
Utah
Total
Mining
Construction
Manufacturing
T.C.P.U.
Trade
F.I.R.E.
Services
Government

943.1
8.0
60.6
128.7
53.2
226.8
50.2
249.5
166.1

Annualized
% Change
From
Month
Ago
6.9
0.0
35.1
9.8
12.0
7.1
10.1
1.9
0.7

%
Change
From
Year
Ago

937.9
8.0
59.1
127.7
52.7
225.5
49.8
249.1
166.0

896.0
8.1
52.8
122.7
51.2
217.3
46.6
233.8
163.5

5.3
-1.2
14.8
4.9
3.9
4.4
7.7
6.7
1.6

Mar
'96

Feb
'96

Jan
'96

Mar
'95

Feb
'95

Idaho
Nevada
Utah

5.1
4.6
3.2

4.9
5.0
3.2

5.0
5.1
3.1

5.4
5.1
3.1

5.7
5.2
3.4

U.S.

5.6

5.5

5.8

5.6

Unemployment Rates (%)

Unemployment rates are from the household employment survey, all other data are for nonagricultural payroll employment.
All data are seasonally adjusted.

FEDERAL RESERVE BANK OF SAN FRANCISCO

1996 Issues

Mailing Date

January
March
May
July
August
September
November
December

February 1
March 28
May 23
July 5
August 22
September 26
November 14
December 19

Federal Reserve Bank of San Francisco
101 Market Street
San Francisco, CA 94105

WESTERN ECONOMIC DEVELOPMENTS / MAY 1996

PRESORTED
FIRST-CLASS MAIL
U.S. POSTAGE PAID
PERMIT NO. 752
San Francisco, CA