Vol. 45, No. 5, May 2010
Highlights Summary Data Commentary
(return)
The South Carolina leading jumped 2.3 percent.
Residential construction increased 12.2 percent.
Unemployment insurance claims dropped 3.8 percent.
The South Carolina coincident indicator improved for the third consecutive month.
The Palmetto economy is slowly recovering from what many consider the longest and deepest economic downturn since the Great Depression. The advanced indicators for the state are steadily improving and this is reflected in the South Carolina leading index. Nevertheless, the coincident indicators of economic activity are still flat suggesting, that unlike past recessions, the recovery will occur at a very slow pace. In March 2010, the South Carolina leading index increased 2.3 percent and reached a new high of 143.1. The increase in the leading index can be partially credited to the improvement in the residential construction market. The seasonally adjusted value for residential construction increased 7.7 percent compared to February 2010 and increased 13.3 percent when compared with the same month last year. Seasonally adjusted unemployment insurance claims also dropped 3.8 percent and returned to 5,754, a value in line with the long-run average for this series. This trend suggests that employers are no longer shedding jobs and should eventually impact the labor market. However, this may not necessarily translate into a reduction in the unemployment rate. The perceived improvement in the economy is likely to invite discouraged workers to come back to the labor force and that will reflect negatively in the unemployment rate. The other two indicators that track the state of the manufacturing sector also had positive readings in March. The seasonally adjusted average manufacturing workweek increased 1.3 percent while inflation-adjusted earnings increased 1.7 percent. The other component of the South Carolina leading index, the Conference Board leading indicator for the United States, reached its highest value for the year with a solid increase of 1.4 percent in March. Economic analysts with the Conference Board believe that the performance of the index suggests a slow recovery of the U.S. economy that should continue over the next few months. The South Carolina coincident economic index, the index that tracks the state of the Palmetto economy, has for the first time since the beginning of the recession shown three consecutive positive readings. In March 2010, the index increased by 0.1 percent. The components of the coincident index had mixed readings. The unemployment rate remained unchanged at 12.4 percent. Total nonagricultural employment increased marginally by 500 jobs, while seasonally adjusted real retail sales had an unexpected drop of 0.3 percent. Consumers are spending more but are still very cautious.
For months the South Carolina leading indicator has been pointing to a recovery. The first signs of the recovery are now reflected in the coincident indicator. Continuing improvement in the economic conditions is anticipated in the months ahead. However, the debt crisis in Europe may impact negatively the South Carolina economy. First, because it brings more instability to the financial markets, the instability may again scare consumers and lead to a retraction of demand. Second, because the crisis is leading to a rapid devaluation of the euro against the dollar, a devalued euro may affect the international competitiveness of the Palmetto economy, which depends largely on exports. The markets are anticipated to soon regain confidence on the ability of Europe to handle its debt problems.
Indices, Leading, and Coincident Indicators seasonally adjusted data for Jan 2010 through Mar 2010.
monthly percentage change
Notes [1] Calculated from data provided by the S.C. Employment Security Commission. [2] Calculated from data provided by the F.W. Dodge Corporation. [3] Calculated from data provided by The Conference Board. [4] Calculated from data provided by the S.C. Department of Revenue. [R] Revised. [n.a.] Data not available. Monthly percentage change based on seasonally adjusted data. Annual percentage change based on unadjusted data. *1982-1984 dollars
Most economists agree that technological innovation is the major force in economic growth. However, the measurement of technological innovation is a complex task and there is no single indicator capable of capturing the level of innovation activity of an economy. One indicator often used for this purpose is the number of issued utility patents. Patents have been granted in the United States continuously since the late 18th century providing over 100 years of consistently reported data. The United States Patent and Trademark Office (USPTO), the official entity responsible for granting and issuing patents, makes publicly available all information for the patents that are issued. This database is updated on a weekly basis and contains a wealth of information, including information about the geographical location of the inventors. Hence, it can be used to look at the evolution of regional patenting activity. However, using patenting information as a proxy for innovation activity has some limitations. The most obvious one is that not all inventions are patented. Another known problem is that quantity of patents does not translate into quality of patents. Nevertheless, the number of patents still provides a useful measure of the degree of technological innovation in the region.
The Division of Research collected information for the yearly number of utility patents issued from 2000 to 2009, for the major metropolitan areas in South Carolina. The following table shows the average number of utility patents from 2000 through 2009 for the South Carolina MSAs.
Source: South Carolina Economic Development Data Clearinghouse.