Third Quarter 2002 Business & Economic Survey Results
by Bernard Goitein, Director
Center for Business and Economic Research
In cooperation with the Turner Center for Entrepreneurship, the Center for Business and Economic Research (CBER) has expanded its studies of area consumer confidence to include three surveys of Peoria area consumer confidence in 2002.
The CBER measure of consumer confidence is the Index of Consumer Sentiment (ICS), a measure pioneered by investigators at the Survey Research Center of the University of Michigan. The ICS includes five components associated with present and anticipated financial conditions, short and long term expectations for the economy, and perceptions market conditions for purchases.
The Summary Peoria Metropolitan Statistical Area (MSA) Index reveals the impressive expansion of the local economy through most of the 1990's. A local downturn began during the second half of 2000, eight months before the March 2001 onset of the national recession.
A further local decline was found in the first quarter of 2002. Local business performance has not declined further in 2002, and has stabilized at its first quarter levels.
Detailed description of the third quarter indicators appears to the right. All data have been seasonally adjusted unless otherwise indicated. All discussions of quarter-to-quarter changes, e.g., from the second quarter of 2002 to the third quarter of 2002, involve “seasonally adjusted” changes, i.e., changes that occur above and beyond normal seasonal quarterly growth or decline. Maintenance of this business indicator database is funded by the Peoria Journal Star, and report preparation supported by the Turner Center for Entrepreneurship of Bradley University's Foster College of Business Administration.
Labor Markets: Third quarter employment losses in some sectors (e.g., Manufacturing) were largely off-set by gains in others (e.g., Business and Non-Professional services), so that the number of area residents who were working was little changed at just under 170,000.
New jobs were scarce, with new job opportunities down 13.5% in the third quarter, for the tenth consecutive quarterly decline in the Job Openings Index. With few new jobs, and layoffs up 25.1% from the previous quarter, the number of area residents who were looking for jobs rose to over 9000. This increase in the number of the unemployed pushed the area's unemployment rate up 0.3 percentage points, for a 5.2% rate in the third quarter.
Manufacturing: A 0.9% decline in third quarter manufacturing jobs reversed the previous quarter's increase, leaving the 32,618 jobs with area manufacturing firms down 3.3% from the year before. The factory workweek fell 3.3%, to 39.7 hours/week in the third quarter, reversing the increases of the previous two quarters. Equipment sales of major local manufacturer Caterpillar Inc, rose for the second quarter in a row, returning to earlier year levels.
Services: There were no significant third quarter declines in the three private service industry categories studied. Employment rose 1.2% in the Business and Non-Professional Services sector, starting to reverse declines earlier in the year. Employment in the transportation, communication, and utilities sectors fell by less than 0.5% during the third quarter. Third quarter employment in Professional Services (dominated by the medical sector) was stable at 33,476 jobs. The Hospital Revenue Index rose for the second quarter in a row, putting hospital revenue 7.3% above last year.
Real Estate and Construction: The number of homes sold in the third quarter fell for the second quarter in a row, despite declines in mortgage interest rates over the same period. Employment in construction also fell in both the second and third quarters.
After four consecutive quarterly declines, the “Homes Available for Sale” index rose in the third quarter of 2002, increasing the selection of homes for sale, and allowing the average price of homes sold to increase to 6.1%. Also increasing were new Single Family Building Permits, up 12.3% from the previous quarter, and 31.5% above last year.
Retail Trade: Automobile rebates and low interest rate incentives boosted new car and truck sales in the third quarter, putting these sales 42.1% above last year. Employment in retail trade rose slightly (0.6%) in the third quarter, to 31,464. The 2.4% decline in factory worker wages found in the third quarter, however, contributed to a 2.6% decline in the CBER's estimate of third quarter retail sales in the Peoria MSA.
Conclusion: Local business and economic conditions have stabilized at largely favorable levels in 2002, with the third quarter Peoria MSA Summary Index of 105.26, nearly 170,000 area residents working, and a 5.2% unemployment rate.
Looking ahead, three of four leading indicators for the local economy dropped in the third quarter, suggesting that economic growth will be delayed until next year. Third quarter revenues of major area employers are encouraging, with equipment sales of major area manufacturer Caterpillar Inc, and of area hospitals both on the rise. A continued increase in the revenues of area employers should boost local business and employer confidence to levels that allow a lengthened work week, increased hiring, and a renewed economic expansion in 2003. The low interest rate policy of the Federal Reserve System should help sustain any recovery nationally and locally.
Background: Most of the business indicators discussed are seasonally adjusted, and all quarter-to-quarter changes are seasonally adjusted. The CBER relies on the Census X-11 ARIMA (Auto Regressive Integrated Moving Averages) procedure for seasonal adjustment to recalculate these adjustments each year. The seasonal adjustment procedure removes the impact of seasonal components, i.e., the predictable seasonal variations of the data, so that any underlying trend in the data series can be more readily discerned.
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