Highlights

Summary

Indicator Data

Commentary

Highlights return to top

• The Palmetto economy added 4,500 jobs.

• Residential construction rose 1.3 percent.

• The unemployment rate jumped from 5.7 to 5.9 percent.

The Index of Leading Indicators for South Carolina is composed of the Average Manufacturing Workweek (hours), Initial Claims for Unemployment Insurance, and Real Weekly Earnings

The Index of Coincident Indicators for South Carolina is composed of Total Nonagricultural Employment, Real Retail Sales, and Total Unemployment Rate

Summary return to top

The national economy remains weak, with little hope for improvement in the short term. Rising energy and food prices are affecting household budgets and slowing consumer spending. Residential real estate markets are generally weak across most of the nation, and last month the national unemployment rate jumped from 5 to 5.5 percent, posting its sharpest one-month increase since February 1986. In May, the U.S. economy lost 49,000 jobs, the fifth consecutive month of decline in total nonfarm employment. The continued deterioration of the labor markets and the inflationary pressures in the economy are clearly adding to the risks of recession.

Against this backdrop, the South Carolina economy seems to be holding better than the rest of the economy. This month, the South Carolina Leading Index, which had decreased steadily between August 2007 and February 2008, posted its second consecutive increase, suggesting that economic conditions have finally stabilized. However, this month’s small increase of 0.1 in the index is also an indication that we should expect paltry economic gains in the months ahead. The individual components of the leading index show again a mixed record. After dropping 5.7 percent last month, residential construction (seasonally adjusted) increased 1.8 percent this month. April’s numbers for single-family housing permits also showed considerable improvement this month. It may be early to claim that housing has reached bottom in South Carolina, but the recent numbers suggest that there is some reason for optimism. Average weekly unemployment insurance claims remained above the 7,000 mark, but dropped 7.1 compared to last month. In the last five years, unemployment insurance claims have averaged around 6,000, so this month’s figure of 7,071 shows that there is still substantial pressure on the labor market. The two state economic indicators for the manufacturing sector, average real weekly earnings and average manufacturing workweek, experienced a small but meaningless drop this month. In fact, the manufacturing sector, which has been shedding jobs since the last recession of 2001, experienced a small increase in employment in the last two months. As discussed in this month’s commentary, exports of goods from South Carolina have increased substantially, and may be the reason manufacturing is holding so well.

Finally, the other component of the South Carolina Leading Index, the U.S. Leading Index, increased again this month by 0.1 percentage points.

The South Carolina Coincident Index slipped 0.3 percentage points, indicating a decrease in economic activity this month. This drop was driven by two of the components of the index, retail sales and the unemployment rate. Real retail sales dropped 1.6 percent compared with last month. However, retail sales should bounce back next month with the arrival of the stimulus checks to households. The unemployment rate increased from 5.7 to 5.9 percent, an increase of 0.2 percentage points, much smaller than the increase of 0.5 percentage points observed for the U.S. economy. The total employment component of the index increased 0.2 percent this month. Construction lost an additional 2,800 jobs this month, but employment increases in the financial, education, health, and leisure and hospitality sectors were able to offset the loss in construction.

In sum, as was predicted several months ago, the Palmetto economy is going through a period of anemic growth. Given the national softening labor market and the inflationary pressures currently observed, significant improvement is not expected in the months ahead.

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

Commentary return to top

For the last several years, the U.S. dollar has been steadily depreciating against other major currencies. A trade-weighted exchange index against a basket of the United States’ trading partners’ currencies shows that, since 2002, the dollar has lost more than 30 percent of its value. The largest decline occurred against the euro. In November 2002, a dollar exchanged at parity with the euro, but in April 2008, the exchange rate was 1.58 dollars per euro.

The dollar’s steep fall in recent years has been linked to increases in the price of energy and commodities in the international markets and increased prices of imported goods in general. However, the lower dollar also had the effect of boosting U.S. exports, an important shock absorber during the economy’s troubles. During the last four years, U.S. exports of goods and services have increased around 8 percent a year in real terms and are assuming increasing importance in the GDP. In 2006, exports comprised 11.1 percent of U.S. GDP, the highest ever in dollar terms.

Because of its strong manufacturing base and export-oriented industry, South Carolina is one of the state economies that most depends on world markets. The state has the highest overall share of export-supported jobs (9 percent) among the 50 states, and more than one-fourth of all manufacturing workers in South Carolina depend on exports for their jobs. More than that, the export sector in South Carolina seems to be taking advantage of this opportunity. The cumulative data up to April 2008 shows that this year, the U.S. exports of manufactured goods increased by 14.8 percent compared to the same period last year. However, comparable figures for South Carolina show an increase of 47.1 percent, one of the highest growth rates in the nation.