Retail sales down less than 1 percent in Douglas

On November 6, I provided an economic outlook presentation at the Economic and Trade Forum hosted by the City of Douglas. The following is a condensed version of my presentation.

 The big economic question these days is: Are we in a recession yet? The most important measure we use to determine if the national economy is in recession is Gross Domestic Product. The most common definition of a recession is at least two consecutive quarters of negative GDP growth. GDP is the value of all final goods and services produced in the economy, so it’s our broadest measure of productivity.

In the third quarter, GDP declined by 0.3 percent. Most economists predict a further decline for the fourth quarter. When all is said and done, the recession of 2008 will likely be called as beginning in the second or third quarter of the year.

Inflation continues to be a problem, though there has been some moderation in recent months. In July, consumer prices nationwide were 5.6 percent higher than July last year. In August and September, prices were 5.4 and 4.9 percent higher, respectively. The decline in energy prices combined with recessionary conditions should help contain inflation in coming months.

We don’t have the data necessary to detect recessions at the local level in the same way we can at the national level. But we can look at the data we do have and make some generalizations.

Retail sales are one of the best indicators of the health of the local economy. Cochise County’s retail market has been in recession since November last year. In 2007, the county’s retail sales were down 1.7 percent compared to 2006, after adjusting for inflation. From January through August this year, sales were down 4.6 percent.

In Douglas, retail sales have been in recession since September last year, although recessionary conditions at the city level have been milder. Last year, retail sales in Douglas were down 0.6 percent after inflation. In the first 8 months of this year, sales were down 0.8 percent. 

Another good indicator of the health of the local economy is restaurant and bar sales. In 2007, restaurant and bar sales in Cochise County were up 0.1 percent after adjusting for inflation. In the first 8 months of 2008, sales were up 1.4 percent. In Douglas, the city’s restaurant and bar sales were down 2.9 percent in 2007 and 8.9 percent in the first 8 months of this year.

The countywide unemployment rate was 4.2 percent in 2007. For the first 9 months of this year, unemployment rose to 4.8 percent. The county’s seasonally adjusted, monthly unemployment rate hit 6 percent in September, its highest level in 5 years. In the 12 months ending in September, Cochise County lost 1,250 jobs, with most of the losses occurring in trade, transportation, and utilities; construction; and other services.

In Douglas, the unemployment rate last year was 6.4 percent. For January through September, the city’s unemployment rate was 7.4 percent. In September, the unemployment rate hit a 5-year high of 9.3 percent.

New construction in Douglas and at the county level declined in 2006 and 2007. In the first 5 months of 2008, new home permits countywide fell 8 percent compared to the same period of 2007. In Douglas, the number of permits was down 53.1 percent from January through September.

Existing home sales at the county level were down 20.7 and 10.2 percent, respectively, in 2006 and 2007. Despite the decline at the county level, sales in Douglas in 2006 and 2007 were up 3.3 and 19.1 percent, respectively. In the first 9 months of 2008, sales were down at both the county and city level. Sales at the county level fell 22.8 percent from January through September, while sales in Douglas fell 7.1 percent.

The economic outlook at the local level continues to be worrisome. We can expect to see declining sales across the industries, more job losses, and higher unemployment for the remainder of 2008 and into 2009. Declining revenues at the state and local government levels could begin to threaten government jobs, which have continued to grow during the current downturn. New home construction countywide is likely at or near the bottom of the current down cycle; however existing home sales likely won’t hit bottom until 2009.

If you have any questions on the economy, please contact the CER at (520) 515-5486 or email us at cer@cochise.edu. Be sure to check out the CER’s website at www.cochise.edu/cer.