California Economic Activity Index debuts, shows state gradually recovering

A new economic index from Comerica Bank is the first-ever monthly report on California’s economy, as far as I can tell. The debut issue of the California Economic Activity Index shows California’s economy climbing out of the hole it fell into late last year.

The index tracks multiple metrics. Here’s the report’s explanation of its methodology:

“The indicators reflect activity in the manufacturing, tourism, travel and trade sectors, as well as job growth and consumer outlays.

“More specifically, manufacturing activity is measured by shipments in the electronic parts and accessories industry. The Comerica California Economic Activity Index uses several variables to capture tourism and travel activity, namely vehicle miles traveled along California highways, state-level hotel occupancy rates and air traffic data collected from the state’s major airports. Variables accounting for overall state exports and container shipments at the state’s largest port represent California’s trade sector. Job growth at the state level is captured both by overall employment and by insured unemployment claims rolls. Finally, retail sales activity is expressed in terms of state sales tax revenues.”

A graphic illustration of the index by San Francisco Chronicle graphic artist Todd Trumbull shows that the flips your stomach did last fall weren’t driven by your imagination, but by a real nose-dive in which the index dropped 10 percent in the second six months of 2008.

But there’s good news: Since the start of this year, the index has been climbing as fast as it fell, rising to 99 and closing in on its former peak value of 102. Unemployment in Cali is still unusually high — close to 12 percent — but retail sales and trade spending are coming back around.

Comerica chief economist Dana Johnson said in a prepared statement:

“Sales tax revenues, which so far have been the biggest contributor to the rebound in our Index, may flatten out in upcoming months, thereby reversing some of the recent strength. I will become much more confident that a sustainable recovery is underway once I begin to see employment gains also contributing to the rise of our Index.”

The general reaction from economists: California’s stickiest economic problem is indeed unemployment. These economists are watching for full-time payroll jobs to come back. I have this sinking feeling in my gut: They’re gone for good, destroyed forever by the job-apocalypse. We’re all contractors now.

[Image: Todd Trumbull/San Francisco Chronicle]

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