What Does 2010 Hold For San Diego Economy?
Friday, January 8, 2010
2009 was a tough economic year for our region and the nation. What are the economic predictions for the new year? We discuss what's expected to happen with the local housing market, unemployment, and consumer spending.
GLORIA PENNER (Host): I’m Gloria Penner. I’m joined by the editors at the roundtable these days in San Diego. Today we’ll take a hard look at whether the economic signposts are steering San Diego to a better year, what the governor was really saying in his State of the State speech, and the restless politics in North County’s Oceanside and Poway. The editors with me today are John Warren, editor and publisher of San Diego Voice & Viewpoint. John, it’s so good to see you again.
JOHN WARREN (Editor/Publisher, San Diego Voice & Viewpoint): Good morning, Gloria. Thank you.
PENNER: Good morning. Leslie Wolf Branscomb, editor of San Diego Uptown News. Well, welcome back, Leslie.
LESLIE WOLF BRANSCOMB (Editor, San Diego Uptown News): Good morning. Thanks for having me.
PENNER: Good morning. And Kent Davy, editor of the North County Times. It’s always a pleasure to have you in the studio, Kent.
KENT DAVY (Editor, North County Times): Thanks for having me.
PENNER: Our number is 1-888-895-5727, that’s 895-KPBS. Well, among the New Year’s greetings last week there were the usual, you know, have a happy… or have a healthy… but the one that seemed to have the most passion behind it was have a prosperous new year. And after the battered economy of the last few years, we can understand why. So, John, let’s focus on San Diego and let’s start with jobs. The jobless rate is 10.3%, the worst since the Great Depression. San Diego Mayor Jerry Sanders says he’s committed to creating jobs. Any sign that’s happening?
WARREN: Well, maybe I’ve missed it. I haven’t seen signs of it. I know ten years ago we had a jobless rate of 3.2%. We have much discussion about doing a number of things in town, including convention center expanding projects, maybe a ballpark but when you look through all these things, it’s the nature of San Diego. Our economy has relied heavily upon tourism and the biotech industries. I don’t see the tourism scenario turning around based on the economy before at least 2012, according to Carol Wallace with our convention center. And so there’s a desire to create jobs but I don’t think we know where to really turn unless I’ve missed something.
PENNER: Well, it’s interesting because Alan Gin, who is a University of San Diego economist, at the San Diego Economic Roundtable yesterday, I believe it was, said, you know, this is – this has really been bad. 50,000 jobs have left San Diego. And he only sees it coming back at the rate of 3,000 to 5,000 jobs a year. And every sector has had a problem except maybe government, and yet we hear that there is federal stimulus money, Kent. How important is federal stimulus money in providing jobs? Is it being used effectively?
DAVY: Well, you’ve got stimulus money going into some things like highway construction and some related government programs. It certainly acts as a backstop but it is not a fundamental job creator in any longterm sense. And I think that’s one of the fundamental problems that we are facing right now. I also think it’s part of the reason that some people in the administration are talking about a second round of stimulus later this year.
PENNER: Even though you don’t think it’s been effective?
DAVY: I don’t think – I – You know, I don’t think it’s been effective because it takes – it’s taken way too long to put money into the pocket. They’ve turned around and done something like slash payroll taxes so the money was immediately into the economy then it can jazz an economy quickly. But to delay it into construction projects that many of which are not even started yet and the money’s not even out in the world, doesn’t do any good.
PENNER: The mayor keeps talking about our projects being shovel ready. I mean, that’s the swing phrase of…
PENNER: …2009, it was anyway.
DAVY: …my – I have a brother who is a consultant to the architectural and engineering industry and he made the comment to me several months ago that as soon as the word shovel ready came along, you saw a whole list of people with projects simply say, oh, that project on the books, well, it’s shovel ready.
PENNER: Yeah, that’s the answer. Let me ask our listeners about that before I turn to Leslie. Have you found a job market to be basically paralyzed for you or for someone that you know? A lot of people have just stopped looking, and that’s of concern. Do call us, let us know what your situation has been, 1-888-895-5727, 895-KPBS. Kent Davy.
DAVY: The – I think there’s something that the people need to think about with regard to the San Diego economy. So much of the boom in the economic fortunes here was dependent on the real estate industry, its health, the spinoffs that come from it. So as the housing market collapsed, building collapsed and there are virtually no new home construction, very little construction going on, all of the related industries then suffered. We’re sitting now in a market in which at least with home prices – the Case Shiller here indicates that the prices have finally stabilized, maybe uptick a little bit over the last three or four months. But we are still not – we are by no means in a healthy real estate economy here. Until that happens, if San Diego’s future is real estate again or the building industry again, that’s going to have to get healthy and there are still thousands of foreclosures on the market. There’s a lot of property, a lot of the property being purchased is being purchased on the bottom end for investment purposes. You’re not seeing any vibrant growth yet.
WARREN: Well, also remember, I think last year 2900 building permits were issued altogether, less than 4000 anticipated for this year and it’s a very slow process. And based on that, we’re looking at going through a cyclical scenario where we’re going to have no building for a while. We’re going to have an increased demand for housing, no new housing. And then, in about five or six years, we’ll be trying to catch up. So, meanwhile, we suffer from 2010 to about 2014 or ’15 with all of these false assurances.
PENNER: Our number is 1-888-895-5727, 895-KPBS. I was at a meeting yesterday where one of the speakers said the recession is over but nobody believes it, and he basically blamed the media. Are we feeding into that this morning, Leslie, by, you know, giving all these sort of sad responses to whether the economy is improving?
BRANSCOMB: Well, I would prefer to think of it as realism, that what the media provides is a reality check. And it’s easy, of course, to shoot the messenger. We’re all familiar with that. But we heard so many predictions last year, how the economy was going to turn around in 2009, and people saying right out, it’s over, the econ – the recession is over. Well, it’s not. Clearly, it’s not. And I don’t see anything wrong with being careful and with warning people to be a little more careful about their investments and to not just jump into believing that everything is fine when it isn’t. And I don’t think this is necessarily a bad thing. I think that realism is going to prevent us from overspending as we have in the past. A lot of people are in trouble with their houses because they spent more than they could afford. And this is part of what contributed to the big bust of the housing cycle.
PENNER: Well, do you think that we’ve learned our lesson about the dangers of inflated housing prices being chased by loans with insufficient income to pay the mortgages?
BRANSCOMB: I suspect that it’ll go around in a cycle and this will happen again. I think we’ll go through a period of being cautious and 10, 15, 20 years from now a new generation of homebuyers will come up and might get caught up in the same promises. But I don’t know if it’ll ever be to that scale of taking advantage of the homebuyers that has happened in the last few years around here.
PENNER: Okay, well, remember we started discussing it with jobs, we sort of morphed into housing but they are interrelated. Let’s hear what Lorena in Chula Vista has to say. Lorena, you’re on with the editors. Thank you for calling.
LORENA (Caller, Chula Vista): Hi. Thanks for taking my call.
LORENA: I would like our guest speakers, if they could consider some alternative sources of industry growth in San Diego? I feel like it’s just so tenuous for our economy to be so dependent on real estate. It obviously showed just recently and I know my husband is trying to get some stimulus money actually to start an endeavor on alternative energy sources. But just love to hear your thoughts on that.
PENNER: Okay, I think that’s such an excellent question because many people feel that when you’re in a down economy it makes you more entrepreneurial, that you start developing new, fresh ideas. Are there any fresh ideas coming out in terms of alternative, let’s say, manufacturing jobs or manufacturing opportunities?
WARREN: Well, certainly there are going to be some evolving manufacturing opportunities because of things like the proposed idea of suspending sales tax on green technology or equipment related. But, you know, there are two other things here. Back to the first question of the media, the media’s role, I think the media is great – has played a great role as a part of the problem. We’re still calling this a recession when, in reality, it’s been a depression and we don’t want to grab that term. And why do we resist calling it what it is? It’s a depression. That’s what it’s been, and we play with the terms. Now, when we come forward and get away from that to this question about real estate, real estate is going to dominate the discussion because of the people who own real estate and because of the influence of real estate in media. But to the caller, I would say don’t despair because other people are saying, economically, that this is the greatest time in the world for entrepreneurs to come forth and to do new and different things. And if you look at the future here, you have a geriatric population, you have a service oriented society that’s moving away from goods to service, and we’re not paying attention to what’s taking place, so that’s the biggest problem.
PENNER: John, I must ask you before I turn to Erin in San Diego, who’s calling in—it sounds like she’s right on the mark with you on this—I’ve got to ask you, define depression as opposed to recession. I mean, you threw out that term, now you’re going to have to back it up, sir.
WARREN: Well, I’ve always said that a recession is what we call what happens to someone else, a depression is when it hits us. When someone else loses their job and their income and their house, we look at it as a recession. When it hits us, it’s now – now we’re in a depression. And that’s the problem, we have not extended the definition beyond ourselves…
WARREN: …to other people.
PENNER: Okay. Erin, it’s your turn. Erin in San Diego is joining us now. Hi, Erin.
ERIN (Caller, San Diego): Hi. My comment is, I’m a recent nursing school graduate and we kind of think of nursing and healthcare as a recession proof job, and I thought it would be, too. But actually a lot of – myself, included, and a lot of the people I graduated with have not been able to find nursing jobs in San Diego.
PENNER: That’s an amazing thing to hear. I understood we had a shortage of nursing (sic). What about that, Kent?
DAVY: It was my understanding there’s been a shortage of nursing (sic), that’s why colleges like Cal State San Marcos and Palomar have been pushing, and I think even Mira Costa College, has been pushing new nursing programs, try and cure a shortage. So I’m surprised to hear this.
PENNER: And whenever you speak to a nurse, they say that they’re overworked, they have to work too many hours, they have too many cases to handle. So this is surprising, Erin. Are you still there?
ERIN: Yes, I’m still here. And, you know, the phenomena is for new graduate nurses because what we see now is all of the nurses that have been in the field for years and years are reentering the workplace because, you know, maybe a spouse lost a job or they’re picking up more hours or they’re just delaying retirement because their retirement funds have, you know, fallen so much.
WARREN: …well, there are other factors involved in the nursing industry. First you have to look at the very fact that there are a lot of older nurses who are moving to become mobile and they’re traveling from place to place in terms of assignments. The newer graduates are not really being picked up in salaried positions because hospitals are trying to hold down costs. So the newer graduates are finding jobs in secondary rehab facilities that pay less and many don’t want to accept those. Those who do get into larger established institutions then they get in on a part time basis as they try to balance the books. Ironically, you talk about the shortage, yet last January in the Philippines they graduated 12,000 nurses at one time. Many of them are coming to here and other countries, and so there’s an influx of people and they are cherry picking those that they want to hire at this point while they’re still holding back on hiring because of budget factors in spite of the nurses in California demanding a different ratio.
PENNER: Do you have a final comment on this, Kent, before…
DAVY: Well, I was just curious to ask our caller, if she was still there, if there are still job listings out there for nurses.
PENNER: Erin, you there? No, I don’t…
ERIN: There’s lots of job listings, it’s just you have to have the experience at this point to really get in anywhere.
PENNER: Okay, well, I thank you very much, Erin, and good luck to you. We’re going to continue our discussion about San Diego’s economy. We’ve been focusing on jobs and housing at the moment but there are other aspects to discuss and when we come back, we will. We’ll be back in just a few seconds. This is the Editors Roundtable. I’m Gloria Penner.
PENNER: This is the Editors Roundtable. I’m Gloria Penner. And we’re talking about San Diego’s economy for the next few minutes. You can still be part of the conversation right along with Kent Davy from the North County Times and John Warren from San Diego Voice & Viewpoint and from San Diego Uptown New, we have Leslie Wolf Branscomb. And now we have Bill in Chula Vista. Bill, you’re on with the editors.
BILL (Caller, Chula Vista): Hi, Gloria. Thanks for taking my call.
PENNER: You’re welcome.
BILL: Well, hey, you know, I was just listening. I just turned the radio on. I love this show, Roundtable is great, of course.
BILL: But I heard somebody make a comment about the housing crisis which, you know, we’ve been talking about it for a couple of years now, seriously for one year. And I heard somebody say that, you know, we’re in this mess because the homeowners out there just got a little, you know, they wanted more than they could afford and that maybe the homeowners are being a little greedy. She didn’t say greedy but we wanted more than we could afford. I’m going to tell you straight up what happened. We were led to slaughter by the banking industry, by the mortgage industry and by these real estate brokers and real estate agents who are just greedier than – I am fuming about this. I’m in the mess. My house is completely upside down. And you know what? I trusted the system. I trusted the bankers, I trusted my real estate agent, and I’m going to tell you, a lot of people are out there – I’m – I’ll be the first one to say I don’t know enough about financing but I trusted the person I was working with to do the right thing, and I’m going to stick up for the homeowners that are out there that are in this mess. And that’s basically what I had to say.
PENNER: Well, I love your passion, Bill. I think it’s important for, you know, people who feel strongly to express themselves. That’s one way of getting it across to your friends and neighbors and everybody else. Thanks for your call. And let me ask you, Leslie, to what extent are we at the mercy of, let’s say, national economic policy where the argument is over how much regulation should there be over financial institutions.
BRANSCOMB: Well, our caller is right, and I’m sorry, I didn’t mean to imply that the homebuyers were at fault for this. Many of us did get over – get in over our heads for the last few years. And a lot of it was, you’re correct, that your lenders leading you to believe that you can afford more than you can. And I do believe there should be more oversight and I know there’s always a tremendous backlash against the idea of big brother government regulating everything down to the person who’s looking for a home mortgage but it does need to be done because the – you are correct, the greedy parties in this, I think, did tend to be the lenders and the brokers. Everybody played a part in it but it certainly doesn’t all fall on the shoulders of the buyers and there does need to be more regulation. I would be in favor of that.
PENNER: So if that’s the case, if, let’s say, we’re pointing fingers and laying blame to a great extent, are these bad guys getting their just due?
BRANSCOMB: No, absolutely not. I mean, the banks that are too big to fail, quote, unquote, being bailed out and now giving higher than ever bonuses to their executives, it really doesn’t seem fair and so many of us on the bottom end, the consumers, are not finding any relief whatsoever.
PENNER: John, you want to add to that? You’re shaking your head sadly.
WARREN: Well, yeah, I’m in agreement with Leslie and with the caller because you have to go back to Wall Street and to the money coming in from outside of the country. Once they realized that the mortgages were solid and backed by the government, there was a demand in Dubai and all these other places for those places in which to put their dollars that they had to unload. And so this country, in return, Wall Street right down to the real estate person, started creating all of these scams to get people – they just needed a warm body and a signature. And I think it’s unfortunate that we keep blaming the homebuyer for a problem that they weren’t responsible for.
PENNER: This is true but there is fallout, is there not, Kent? I mean, right now we’re seeing, because some of these houses are upside down, more is owed on them than the house is worth, property taxes have been reduced.
PENNER: And because of that, county revenue is way down because those property taxes have shrunk. Will the funding of local government continue to suffer over the next few years if properties don’t recover quickly?
DAVY: Well, there’s no question that as tax revenues shrink, governments have to adjust. You have no ability to permanently run deficits like the federal government apparently thinks it can. The state is already saying this year that it is facing a $20 billion shortfall. That will rocket back to local governments. As property taxes here shrink, as assessments come down, there’s just less money to go around. If you stop and think about California particularly and as its job creation engine, the California Association of Manufacturers released some numbers or had some numbers on its weblog recently that said that since 2001 California has lost 650,000 private industry jobs. It has added 130,000 government jobs. So all the job growth has been in government but that government can only be paid for by things like property tax.
PENNER: This is true. And, you know, when we talk about the governor’s State of the State remind me, one of you please, that we need to talk about the governor’s idea for shrinking state government because he does have some ideas about that.
DAVY: I wanted to jump back for a second…
DAVY: …on the housing issue and the pointing of fingers of blame. And there is no question there is greedy Wall Street, there are greedy real estate people but also there is some government policies that are at the root of some of this. There was a very concerted effort on the part of the federal government particularly to extend the American dream to every level that it could in which to create circumstances for people to buy houses when they – with cheap money, with interest guarantees to create programs that allowed people to get into houses with no money down. So while that’s not greed, there is – there was a complex set of factors that go into this housing crisis that are not exclusively a real estate agent making a buck.
PENNER: So it’s more like a climate of change that everybody deserved to be in a house.
PENNER: Yeah. Well, certainly a lot of people tried. Let’s take one more call and this is from Shane in Chula Vista. Chula Vista’s really ringing us up today. Shane, you’re welcome at the Editors Roundtable.
SHANE (Caller, Chula Vista): Yeah, there’s one solution I think would work in – when I think the head of Freddie and Fannie – or Fannie Mae said he couldn’t comprehend his mortgage paperwork, it’s clear you just need like a simple nutritional label transferred over to the mortgage industry.
DAVY: Freddie Mae and Fannie Mae (sic), who now have $400 billion of toxic assets sitting on their books.
PENNER: Freddie Mac and Fannie Mae, and that’s true. Okay, well, with that, Shane, we’re going to move on to the next subject and thank you so much for your phone call.