Alan Gin, Professor of Economics, University of San Diego, author of USD's Index of Leading Economic Indicators
Erik Bruvold, President, National University System for Policy Research
Related Story: San Diego's Unemployment Rate Falls To 7.7 Percent
CAVANAUGH: Our top story on Midday Edition, San Diego's economic outlook has been getting brighter, and new numbers on unemployment have added to the optimism. The county's unemployment rate has dropped to 7.7% last month. The first time the rate has dropped below 8% in four years. Earlier this month, we heard the region's index of economic indicators jumped a fall point in March. It's good news, but questions remain about the types of jobbing being created in San Diego, and the potential effects of government spending cuts. My guests, Alan Gin is professor of economics at the university of San Diego. Welcome to the program.
GIN: Thank you.
CAVANAUGH: And Erik Bruvold is here, president of the center for policy research. The unemployment rate is significantly lower now. This 7.7% is a contrast a year ago, 9.33. That's happened between now and then?
BRUVOLD: Oh, I mean, I think it's good numbers. We've added year over, so since last month, we added over 30,000 jobs to the economy. And I think we're seeing a recovery, not as fast we'd like to see, but a recovery from the recession and the impact. We've seen hiring in the areas of San Diego's scientific and professional areas. So our RND and innovation parts of our economy. Good hiring in the leisure and hospitality areas, and a number of other sectors that are hiring. One of the nice things we've seen is an uptick in government hiring. So some of the cutbacks that had occurred as the state and local governments tried to balance their budgets seem to be over, and we're adding jobs to that sector as well.
CAVANAUGH: Alan, we've heard so much about people just getting tired looking for work and giving up and therefore they're not counted anymore in the unemployment roles. How do we than these numbers really reflect a boost in hiring and not just people giving up looking for work?
GIN: Well, we have seen year over year job numbers up strongly. For the last three month, are the comparisons show a gain of over 30,000. There has been a decline in the labor force, but that reflects the demographic trend. The baby boomers are retiring, so as they leave the workforce, it's going to cause the labor force to drop.
CAVANAUGH: Can both of you go over again where this hiring is occurring most frequently?
BRUVOLD: We've seen some hiring in professional and scientific areas, and that really reflects San Diego's high-tech industry. Not necessarily manufacturing. We've seen hiring in hospitality and leisure. And that's really driven by tourism and those parts of the economy. And then we've seen a robust job growth in temporary services. And the hope is that people are doing that as their first assembly into a full-time and permanent position. So often that's I bellwether for the economy.
GIN: A couple of others are in construction. We lost a lot of construction jobs due to the housing downturn, more than 40,000. We've only gained a couple thousand, but at least we're now on the positive. And then for the first time in a long time we've seen some job growth year over year in manufacturing. We had lost manufacturing jobs for ten out of the last 11 years, now we've seen positive news this year.
CAVANAUGH: So this is good news in a lot of different sectors in the San Diego economy.
GIN: I think when you gain 30,000 jobs year over year, that is a broad-based recovery.
CAVANAUGH: I'm interested in what you said about the fact that the temporary jobs market seems to have expanded, Erik. Does this reflect what you've said, people are entering the market this way? Or you can say businesses may still be cautious about hiring?
BRUVOLD: That's the $64,000 question. And it's tough to answer. What wee seen at the early stages of a recovery is that one of the first sectors that expands are the temporary jobs. And anecdotally what we hear from the folk that is own and manage those companies is that they are doing a tryout period with these employees, and over time we'll start to see job growth as people move into full-time employment. I think Alan is exactly right. We should be happy about the construction numbers being up. But as I say, it's not time to have a toast, it's not time to pop the champagne cork. It might be time to find the bottle opener.
[ LAUGHTER ]
BRUVOLD: Retail numbers are still very sluggish. And the worry also is that the national level, consumer confidence again seems to be dipping in the spring. So the hope really is, and I think we still need to be phoningsod that, is that we're going to see this job growth continue into the second, third, and fourth quarter, and we're not going to see a springtime slump. And that's going to be important for people to feel confident about the economy, to be spending. About two third was our economic activity is locally generated. That just means San Diegans going out and spending and buying from each other.
CAVANAUGH: Let me ask some questions about where this growth in San Diego's employment stands in contrast to other parts of the country. How does the 7.7 employment rate stand against the national rate?
GIN: For the first time since 2008, we have matched the national rate. Finally this month we have gone back and we have cut the national level.
CAVANAUGH: And what about the overall state rate in California?
GIN: The state rate is still much higher. So California as a whole is doing worse than the country as a whole, and San Diego, but it is also coming down.
CAVANAUGH: What are the reasons that we are seemingly being able to create jobs here in San Diego when that's still lagging in other parts of California?
CAVANAUGH: Well, one thing that keeps the unemployment rate high in other parts of California is -- there's a lot of unemployment in agriculture. So we do have a good agricultural sector, but it's not as big a part of our economy.
BRUVOLD: And I'd just add, one of the things about that state rate, it just reflect business the sheer size of the Los Angeles economy, and just how hammered the inland empire and San Gabriel valleys have been since the slump. What drives those areas' growth is pent up demand for housing and construction for people wanting to buy and making those long commutes. Until that happens, you're still going to be elevated rates of unemployment in the L.A. basin.
CAVANAUGH: A lot of hiring going on in the tourism market and the temporary market. How is it -- is it possible for people who are making the somewhat low-wage jobs in the tourism market to add to the recovery that San Diego needs? You just mentioned that there's not this surge in retail sales. If you're just making enough to get by, does that actually help the overall economy recover?
BRUVOLD: I think it's the long and enduring challenge in San Diego, which is that we have lots of interest in coming here to vacation. It's a beautiful place to do so. Our cost of living is particularly high. And that's really around housing. We don't build enough housing in this region to meet our workforce needs. And tourism pays what it pays. So you add those three to the mix, and you're going to likely see good growth in tourism when the national economy is going well. But this disjuncture between the kind of wages paid in the tourist industry and the high cost of housing here in coastal California.
GIN: I thank you is a problem not only here in San Diego but across the country as well. In this downturn we have had a lot of jobs in what people consider the middle-class lost. So consumer spending power is down. And that's one of the things contributing to the slow recovery that we have had. And it's led to a situation where the income inequality is at its worst in decades.
CAVANAUGH: So what we're seeing, if I'm understanding you both right is that more people are getting jobs, but we're still not back to where we were because the nature of those jobs is in a sense lower paying than the original jobs that people lost during the recession.
BRUVOLD: And if you want to be pessimistic, and I don't want to be. I think we've got good numbers on the employment side. But they would say that this may be more of a permanent condition than one that we will recover from. There have been transformations in the economy, it happens every time in a recession. And a lot of the jobs that were in the middle wages may not be coming back into this economy.
GIN: One thing is that you have to look at the sheer numbers that we face. In 2009, we lost almost 70,000 jobs in the local economy. So 30,000 jobs gained and good, but it's going to take us a while to get back. If we're able to add 30,000 jobs this year, that would be the best number since 2000. But we are in such a deep hole, we're still in a bad situation. But we're getting better.
CAVANAUGH: Do you see these numbers as a turning point?
GIN: I think we reached our turning point a while ago.
CAVANAUGH: Ah, ha.
GIN: So we've been building momentum. And I think in the next few months we're going to dip whether the national unemployment rate. We went into the recession because of housing and it took us longer to come out.
CAVANAUGH: Something people are saying may slow the national recovery and our national as well, sequestration. And the spending cuts that affect a wide range of government services. Do you feel that the sequestration cuts that are just starting to come into effect -- we heard about air traffic controllers, may slow us down?
BRUVOLD: Well, I think San Diego has a long-term challenge. We're going to enter an era of more austerity on the federal government. And a decent chunk of San Diego's economy -- we're all Keynesian here. It comes from federal government spending. You're going to see reduced defense budgets in the future. You're going to see reduced spending in discretionary items. And how can San Diego great jobs and opportunities with reduced spending coming? Sequestration speeds that up, but that's going to be a long-term trend. &%F0
CAVANAUGH: We certainly don't need it right now, do we?
GIN: We don't. I think sequestration will slow our economy, but I don't think it's going to be enough to derail it. I think we've got enough strength in the local economy to withstand this. The numbers would be higher without the sequestration, but we're not going to go into another recession.
CAVANAUGH: Besides sequestration, let me civic ask of you both what challenges -- obviously the long-range challenge of cutting back and the amount of money spent on the military and many things. But what other challenges would stand between us and a vibrant recovery?
BRUVOLD: What we've seen over the last two years is a troubling pattern. Good growth in the first quarter, then consumer confidence has been shaken in quarters two, three, and four. That's true locally and nationally. So people pull back. No, I just can't buy that new car. I can't put that home improvement in place. So good growth in quarter one, and a shrinking in quarter two, three, and four. And it seems to be in part because there's such troubling news coming out of Washington and Europe that seem to be politically created recessions. Created political economic crises. So it's important to sustain our economy and 2013, Washington and brussels not creating economic turmoil.
CAVANAUGH: That's interesting. Alan?
GIN: One of the big issues that needs to be discussed in the long-term is the regrowing of the American middle class. It was devastated during this downturn. There's been more internationalization of jobs. So are we going to find a way to create good, high-paying jobs particularly in San Diego where the cost of living is so-so high?
CAVANAUGH: Now, what do you see coming up for San Diego's economy for the rest of the year?
GIN: I think this trend will continue. I think 2013 is going to be a good year for the San Diego economy. We'll do better. We're going to add 30,000, and that would be the best number since 2000.
BRUVOLD: I would concur, provided Washington doesn't continue to create crises. And also true in Europe, in brussels that the EU continues to make good strides. But given that, I think the confidence will remain high. And we'll see over 30,000 in jobs added to the economy this year.
CAVANAUGH: Great discussion. Thank you.
BRUVOLD: Thank you, Maureen.
GIN: Thank you.