The recent release of State and Metro unemployment data from BLS comes at a time when oil prices have just made a new, 52 week high, and it seems appropriate to consider the these developments together. As I have noted previously on this blog, Southern California is a kind of super-region in terms of population and our collective vehicle fleet to both the State of California itself, and to the United States as as whole. Indeed, there is no more perfect region in the country to watch the effects of the housing crash, unemployment, changes in interest rates, and the price of oil.
First, let’s consider that gasoline prices in Southern California are once again solidly above $3.00 per gallon. This is higher than petrol prices one year ago in either November, or December of 2008–or even January of 2009. But of course the advance since that time in unemployment in Southern California has been dramatic. In LA-Long Beach-Santa Ana, unemployment has soared from 8.2% to 11.5% from November 2008 to November 2009. In Riverside-San Bernardino-Ontario, from 9.7% to 14.2%. And in San Diego-Carslbad-San Marcos from 6.9 to 10.3%. While the $4.00 and $5.00 dollar gasoline of late Winter and Spring 2008 was painful, and was falling over a quickly deteriorating situation in California’s economy, this recent gasoline move to post-financial crisis highs is falling over extremely high unemployment in California as a whole. Indeed, the broader measure of unemployment in the metro areas mentioned above would be even higher, as California’s U-6 measure is at least as high as 19.6%. | see: Alternative Measures of Labor Underutilization for States, Fourth Quarter of 2008 through Third Quarter of 2009 Averages.
When the BLS releases its next update to this quarterly report later this month, I expect that U-6 for California will finally crack 20%. Let’s also consider that the 5 Big Counties of Southern California, Los Angeles, Riverside, San Bernardino, Orange, and San Diego, not only contain 60% of California’s total population, but also are the counties where people are very leveraged to the automobile. You can begin to imagine the buzz-saw that will begin to cut across SoCal’s woeful situation should oil rise to $90 and possible $100 as we proceed into Spring.
Gasoline at $3.15 and headed to $3.50 in January of 2010 is at least as destructive if not moreso than the 4-5 dollar gasoline of late Spring 2008 and certainly than the comparable prices of one year ago. More importantly I strongly disagree that these changes in petrol prices have little more than moderately damaging effect on the US economy. And here’s why: if 1 out of 7 people in the country is currently taking food stamps, with the additional data point that 1 out of 4 children in the country are currently benefiting from food stamps, then clearly petrol prices matter. Alot. If a household needs public assistance to put food in the mouths of children, then that household’s monthly gasoline expense rising to say $160 from $120 will not go unnoticed. Recent data has shown that the growth in food stamp demand in California has been quickly accelerating. I think it’s not too strong a conclusion, therefore, to speculate that petrol prices are once again at-the-ready to crush any nascent economic recovery in the United States.