ECONOMY: UCLA Forecast sees slow growth for San Diego County


San Diego County’s sluggish economy will “grind along” in the near future, with job growth barely keeping pace with the expanding labor force, according to a newly released report from UCLA Anderson Forecast.

Some of the economists who prepared the report said Monday in San Diego that their outlook for San Diego County and coastal parts of the state was mildly positive, but stagnant for California as a whole and depressing for inland regions.

The Oct. 31 report reiterated similarly mixed predictions made in September by the report’s authors for the state and national economy.

It described the emergence of a “bifurcated” California, with a relatively healthy coastal sector, kept going by innovation, and a much weaker inland California economy still reeling from the housing bubble.

The Anderson Forecast is a respected producer of economic outlook projections for California and the nation. It has been produced quarterly by the Anderson School of Management at UCLA since 1952.

Nationally, the Forecast reiterated its September observation that the outlook is “far worse” than in its June report, with average Gross Domestic Product growth averaging just 0.9 percent for the five quarters covering all of 2011 and the first quarter of 2012.

San Diego County’s sluggish growth rate means double-digit unemployment will linger through the first half of 2012, wrote University of San Diego economists Ryan Ratcliff and Alan Gin in the San Diego County portion of the report.

The county’s risk of a downturn has increased, they wrote, but very slow growth still seems the most likely outcome.

“Our forecast has unemployment holding steady around 10 percent over this period,” Ratcliff and Gin wrote. “The second half of 2012 sees some improvement, with payroll job growth accelerating to 2-2.5 percent in 2013 and unemployment coming down to 8.5 percent by the end of the forecast.”

San Diego County’s median home price will drop by an additional 4 percent, bottoming out in late 2012, the economists wrote.

Strength from innovation

San Diego benefits from its receptivity to innovation and a tradition of starting up new companies, Ratliff said at a Monday meeting that the Anderson Forecast held in downtown San Diego to discuss the report

Ratliff said he has seen an entrepreneurial spirit among his students at USD, some of whom have received funding from venture capitalists.

“One of San Diego’s strengths is that relative to many other similarly sized economies, similar incomes, is that we are a more small-business economy,” Ratliff said. “We have our own version of Silicon Valley going on here.”

However, Ratliff said leisure and hospitality, another pillar of the San Diego County economy, is far less helpful, because the jobs pay a lot less: An average annual pay of $21,000 compared with $86,000 in professional technology companies.

Interviewed after the conference, Ratliff said North San Diego County has developed its own regional economy, with help from the large military activity at Camp Pendleton.

“One of the things that has buffered San Diego during the depths of the recession has been the military presence, the money flowing in, and the redeployments that have brought more people and more money to San Diego, and a lot of that’s been happening in North County,” Ratliff said.

The Bifurcated State

California as a whole will experience slow growth until the end of 2012, wrote Jerry Nickelsburg, a senior economist with the Anderson Forecast. The unemployment rate will remain about 12 percent for the rest of 2011, then drop to an average 11 percent unemployment through 2013.

However, inside the state, California is experiencing a “bifurcated” recovery, Nickelsburg wrote. The coastal areas have pushed ahead with a technology and exports-oriented recovery.

But inland California hasn’t developed any such growth engine, and the real estate crash, which hit the area particularly hard, still lingers.

“Now that the U.S. economy has stalled, the differential between Coastal California and Inland California has begun to widen and the specter of long-term economic stagnation in Inland California has reared a not very pretty head,” Nickelsburg wrote.

If there’s any comfort, Nickelsburg said at Monday’s meeting, it’s that housing is down so far it can’t fall any further.

“It’s pretty hard to build a negative number of housing units,” Nickelsburg said.

Nickelsburg said he believes that inland California is in for a “a long slog of stagnation,” and that the region won’t recover to 2007 levels until 2017. That could be made worse if there’s significant movement out of the region, which would cause a “negative multiplier effect,” he said.

That adds up to two Californias, he said, “one growing, fairly healthy; one stagnant, maybe contracting.”

 North County Times subscription


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