Outlook good for Bay Area economy

Posted on Sat, Dec. 03, 2005

Outlook good for Bay Area economy
S.F. Federal Reserve executive says inflation is controlled, but future of energy prices unclear

By George Avalos
CONTRA COSTA TIMES

SAN FRANCISCO - The national economy is firing on all cylinders, and the Bay Area economy has begun to chug at a faster pace, a top official with the Federal Reserve said Friday.

Those upbeat assessments of the economy came from Janet Yellen, chief executive of the Federal Reserve Bank of San Francisco. She also believes inflation remains confined to its cage, although hazards still lurk because of the uncertain trend in energy prices.

As for interest rates, the Fed has yet to complete its campaign of raising them to keep the shackles on inflation, she said. Next year, Yellen will become part of the team of Fed officials that sets targets for short-term interest rates. Some analysts believe the Fed should suspend the rate increases, while others argue that rates must rise because the economy is so strong.

On Friday, the evidence continued to lean toward a vigorous economy. The nation created 215,000 new jobs in November.

"We have a labor market that is pretty robust," Yellen said in a question-and-answer session with reporters. She made the comments following a speech to the California Chamber of Commerce. "We have an economy that is growing at trend or a little above trend."

What's more, upward revisions replaced a preliminary estimate of job losses in September following Hurricane Katrina with a modest gain.

"Inflation is essentially under control," Yellen said. "The economy is in a range that is compatible with full employment. So this is really a wonderful situation. While risks abound everywhere, we are doing quite well."

The revisions in the estimates for nationwide employment payrolls mean the economy has created jobs for 30 consecutive months. That's the longest such run since a 33-month streak from 1997 to 2000.

"The economy is well-balanced and strong," said Brian Wesbury, an economist and chief investment strategist with Claymore Advisors LLC. "It involves job creation, and it is not only consumer spending, it is also business investment."

What's more, the Northern California region is showing plenty of signs that its economy and employment sectors have perked up. That would be a welcome departure from the dreadful labor markets in the years following the Internet bubble.

"Job growth in the Bay Area has picked up," Yellen said. "It's been pretty healthy over the last six to nine months."

The upswing extends even to the information technology sector, which was ravaged by the high-tech and dot-com meltdown of 2000.

"In the last couple of months. there has been a pickup in I.T. employment," Yellen said. "There has been significant job growth there in the Bay Area. And that is despite flat growth nationwide in I.T."

Other analysts agree with Yellen that a marked improvement is under way in the Bay Area. But Sean Snaith, director of the Stockton-based Business Forecasting Center at University of the Pacific, said the expansion has bestowed more economic riches in some areas than others.

"The East Bay is the engine of growth that has been pulling along with it a lot of the Central Valley and other parts of Northern California," Snaith said. "San Francisco and the South Bay are the caboose of that train."

Unlike other analysts who believe the Bay Area could lurch into tough times as the housing market ebbs and sectors such as construction wane, Snaith sees even better times ahead for the region.

"We are pretty bullish about the Bay Area and we have a positive outlook," Snaith said. "We are not among the chicken littles about the Bay Area."

Still, Yellen is among those who suspect the housing market has entered a pronounced slowdown, primarily because of the effect of rising interest rates and more costly mortgages.

"We are just starting to see some signs of cooling in house prices" in California, including the Bay Area, Yellen said.

Yellen cited data from the Office of Federal Housing Enterprise Oversight. Home price appreciation in the third quarter in the Bay Area averaged about 8.1 percent, OFHEO found. But in the previous two years, gains were in the 15 percent to 20 percent range, Yellen said.

"We may have some cooling in California in some markets, but nothing terribly pervasive, nothing dramatic," Yellen said.


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George Avalos covers the economy, financial markets, insurance and banks. You can reach him at 925-977-8477 or gavalos@cctimes.com.













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Posted on Sat, Dec. 03, 2005



Outlook good for Bay Area economy
S.F. Federal Reserve executive says inflation is controlled, but future of energy prices unclear
By George Avalos
CONTRA COSTA TIMES

SAN FRANCISCO - The national economy is firing on all cylinders, and the Bay Area economy has begun to chug at a faster pace, a top official with the Federal Reserve said Friday.

Those upbeat assessments of the economy came from Janet Yellen, chief executive of the Federal Reserve Bank of San Francisco. She also believes inflation remains confined to its cage, although hazards still lurk because of the uncertain trend in energy prices.

As for interest rates, the Fed has yet to complete its campaign of raising them to keep the shackles on inflation, she said. Next year, Yellen will become part of the team of Fed officials that sets targets for short-term interest rates. Some analysts believe the Fed should suspend the rate increases, while others argue that rates must rise because the economy is so strong.

On Friday, the evidence continued to lean toward a vigorous economy. The nation created 215,000 new jobs in November.

"We have a labor market that is pretty robust," Yellen said in a question-and-answer session with reporters. She made the comments following a speech to the California Chamber of Commerce. "We have an economy that is growing at trend or a little above trend."

What's more, upward revisions replaced a preliminary estimate of job losses in September following Hurricane Katrina with a modest gain.

"Inflation is essentially under control," Yellen said. "The economy is in a range that is compatible with full employment. So this is really a wonderful situation. While risks abound everywhere, we are doing quite well."

The revisions in the estimates for nationwide employment payrolls mean the economy has created jobs for 30 consecutive months. That's the longest such run since a 33-month streak from 1997 to 2000.

"The economy is well-balanced and strong," said Brian Wesbury, an economist and chief investment strategist with Claymore Advisors LLC. "It involves job creation, and it is not only consumer spending, it is also business investment."

What's more, the Northern California region is showing plenty of signs that its economy and employment sectors have perked up. That would be a welcome departure from the dreadful labor markets in the years following the Internet bubble.

"Job growth in the Bay Area has picked up," Yellen said. "It's been pretty healthy over the last six to nine months."

The upswing extends even to the information technology sector, which was ravaged by the high-tech and dot-com meltdown of 2000.

"In the last couple of months. there has been a pickup in I.T. employment," Yellen said. "There has been significant job growth there in the Bay Area. And that is despite flat growth nationwide in I.T."

Other analysts agree with Yellen that a marked improvement is under way in the Bay Area. But Sean Snaith, director of the Stockton-based Business Forecasting Center at University of the Pacific, said the expansion has bestowed more economic riches in some areas than others.

"The East Bay is the engine of growth that has been pulling along with it a lot of the Central Valley and other parts of Northern California," Snaith said. "San Francisco and the South Bay are the caboose of that train."

Unlike other analysts who believe the Bay Area could lurch into tough times as the housing market ebbs and sectors such as construction wane, Snaith sees even better times ahead for the region.

"We are pretty bullish about the Bay Area and we have a positive outlook," Snaith said. "We are not among the chicken littles about the Bay Area."

Still, Yellen is among those who suspect the housing market has entered a pronounced slowdown, primarily because of the effect of rising interest rates and more costly mortgages.

"We are just starting to see some signs of cooling in house prices" in California, including the Bay Area, Yellen said.

Yellen cited data from the Office of Federal Housing Enterprise Oversight. Home price appreciation in the third quarter in the Bay Area averaged about 8.1 percent, OFHEO found. But in the previous two years, gains were in the 15 percent to 20 percent range, Yellen said.

"We may have some cooling in California in some markets, but nothing terribly pervasive, nothing dramatic," Yellen said.


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George Avalos covers the economy, financial markets, insurance and banks. You can reach him at 925-977-8477 or gavalos@cctimes.com.





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