Orange County Register

A Cal State Fullerton economist doesn’t see any improvement anytime soon in Southern California as a new economic indicator shows the downturn has surpassed the 1990s recession in severity.

Economist Adrian Fleissig bases his gloomy forecast on his Southern California Economic Indicator, a compilation of seven economic components ranging from employment to money supply.

The indicator declined 0.59% in the fourth quarter of 2008, suggesting the local economy will continue its downward spiral three to six more months.  The indicator has now declined for eight consecutive quarters, the worst stretch for the data, which dates back to 1990. (Click on chart to enlarge.)

Fleissig says the length and size of the decline is now much worse than the aerospace and real estate recession of the early 1990s.

“The indicator has fallen for more consecutive months and the declines are relatively larger,” Fleissig says.

Fleissig’s take on the current conditions:

The decrease of 0.59% in the fourth quarter of 2008 suggests a decrease in economic activity in the Southern California region in the next 3 to 6 months. Civilian employment in Southern California, which is notoriously erratic, subject to measurement errors and continually revised, showed a decrease in the fourth quarter of 2008 of 1.19%.
For the quarterly data, two out of the seven components had a positive impact on the Southern California leading indicator. The positive impacts were from the increase the money supply adjusted for inflation and the change in the interest rate spread. There were relatively large negative effects on the SC Leading Indicator from the decline in the Standard & Poor’s 500 stock index, Pacific region consumer confidence index and regional building permits. The decrease in regional nonfarm employment and increase in regional unemployment also had negative impacts on the SC Leading Indicator.

Read the full report HERE.

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