When we hear news reports about various pieces of economic news most frequently it is national data that is being reported. However, at times local data is also being listed, and it is important to differentiate between the two.
Two areas where the reports can frequently diverge would be real estate and employment data. Most of us probably realize that at certain times some states can be performing quite differently versus other states.
When we look at California we can frequently see how we diverge from the nation, as a whole. In addition within California there are frequently large variations among the various counties.
The unemployment rate in California, as of July, was 7.4 percent versus the national average of 6.2 percent. On this measure we are obviously worse off compared to the rest of the country. However, our recovery from the recession has been better than the nation, because our unemployment rate has fallen relatively faster.
Within California there are significant differences. Los Angeles County has an unemployment rate of 8.1 percent, whereas in Orange County it is only 5.7 percent, while in Riverside it is 9.5 percent. In the San Francisco Bay area the unemployment rate is less than 5 percent, while in Fresno it exceeds 10 percent.
One thing that occurs with different unemployment rates is that it impacts migration patterns. At the height of the recession there were significant numbers of people moving from California to other states. As the economy in this state recovers, that trend becomes less prevalent. In addition foreign migration into this state is stronger when our economy is performing relatively better.
Real Estate in California tends to perform in a similar fashion to employment trends. Even though unemployment is relatively high in Los Angeles County, it is the direction of the rate that determines the movement of prices. That is why we have had a strong rebound in home values over the last couple of years here.
One characteristic of California Real Estate is that price movements, both up and down, are larger relative to the national averages. This does tend to coincide with how the California economy behaves. While California has a diverse economy, we tend to do better than the nation during good times, but suffer more during periods of economic weakness.
For the stock market national trends are much more relevant versus local ones. That is because most large publicly traded companies, no matter where they are headquartered, have sales throughout the entire country and also internationally. There are some exceptions, as regional banks and utilities may only operate in certain parts of the country.
For someone who is looking for, or seeking a job change, local employment trends are more important than national ones. When unemployment is lower, the odds of getting better raises also increases. Of course someone’s skills and experience play a role with regard to their job prospects.
If an individual can relocate then paying attention to employment figures outside of Los Angeles County would be relevant. Most people from here would probably not want to relocate to North Dakota, even with its sub 3 percent unemployment rate and $15 per hour pay in fast food restaurants. However, within California there are significant differences in employment among counties, which could entice someone to move.
For an investor diversification is always important. Someone may own a rental property here, and being familiar with the local area is helpful, but in addition that person should have other investments that are not tied to this region. Likewise an individual with a local business, whose customers are just based here, would need investments outside of California.
In summary people should pay attention to both local and national trends. Local is important for one’s job and real estate, while national news impacts the stock market.
Allen Wisniewski has been involved in finance for more than two decades. He lives in Culver City with his family.