Thursday, January 7, 2010
The University of San Diego hosted a panel of San Diego economists yesterday to assess the outlook for the year ahead. Most of the experts said they believe the worst of the recession is past, but they warned the recovery is not going to be rapid, and some said things may never be the same again
The University of San Diego hosted a panel of San Diego economists yesterday to assess the outlook for the year ahead. Most of the experts said they believe the worst of the recession is past, but they warned the recovery is not going to be rapid, and some said things may never be the same again.
The trends illustrated in graphs shown at the County’s Annual Economic Roundtable painted a telling picture. Virtually all of them showed lines that rose and fell like ocean waves over the last few decades and then dropped precipitously in 2009.
Alan Gin, associate professor of economics at USD, was succinct.
“2009 was not a good year. In fact, in my view it was the worst year ever, as far as the local economy was concerned.”
Gin said the San Diego region lost more than 50,000 jobs last year.
Marney Cox, chief economist for the San Diego Association of Governments, said the total number of jobs lost in San Diego since the recession began is close to 70,000. That’s two to three times more, he says, than in any downturn in the past 50 years.
Gin estimated it could take four or five years for San Diego to get back to levels of employment seen before the economic downturn began.
Lynn Reaser, chief economist at Point Loma Nazarene University, says jobs in health care have held steady, and jobs in high tech and accounting may be some of the first to open up this year.
“It’s not going to be easy to get a job,” she said. “You’re going to have to generally lower your expected wage, maybe take a 30 percent cut from what you were taking before, but I think this job market will be turning over the next 12 months.”
The panel was divided over how much consumer confidence is recovering. Alan Gin’s indicators suggest it is climbing in San Diego. But Marney Cox predicted sales tax revenues would drop by 10 percent, the third consecutive year of declines. He suggested malls might have to close.
“It may be time to think about shifting gears here from a consumer economy to a production oriented economy,” he said. “And then transfer those excess malls into factories, where we actually produce tangible things. But it would require a lot of investment to get there.”
Cox suggested sales tax revenue may never recover, as consumers move to buy more on the internet.
This, combined with falling property values, has severe implications for local governments. They rely on property and sales taxes to keep public services going.
Don Steuer, chief finance officer for San Diego County, said last year the county suffered an unprecedented decrease in assessed property value.
“We’re anticipating another reduction for the current year,” Steuer said. “Something less than it was last year. 'Less bad' is the battle cry, as we look forward.”
Steuer said because Proposition 13 only allows property taxes to rise 2 percent a year, it could take 25 years to make up the loss in property values in San Diego County.
“What all this boils down to is we truly are looking at a long-term issue here. This is not something we can hunker down and it’ll blow over in a year or two. We’re living in a new economic reality.”
Steuer said 80 percent of the county’s discretionary funding comes from real estate activities.
The housing market is a key to San Diego’s economic recovery. Sharon Hanley of the Hanley Group says median house prices have fallen in San Diego 13 to 25 percent since 2004. She sees the trend reversing this year, but says real estate and construction will have their hands tied unless banks start lending.
“Without availability of construction financing, I don’t see much hope of a recovery across the board,” Haley said. “I stay with my estimate: price increase of approximately 5 percent, sales increase this year of probably 10 to 15 percent.”
Marney Cox is cautious about talk of recovery. He showed a graph of federal borrowing, where the trend line shoots up off the top of the chart. He says only about 10 percent of federal stimulus money is being spent in areas that create new jobs.
“I think in the end, this deficit spending is not going to pay off,” Cox said. “I think the economy is going to grow too slowly. We are going to see some retrenchments at the federal and state level, especially in the State of California.”
Whereas one panelist compared the recovery to a V shape, Cox had another analogy.
“It is going to be more like the Nike swoosh.” He said, “It’s going to be very long, tailed out.”
However most of the panelists agreed San Diego is positioned to have a recovery that could outperform the rest of the state and the nation.