MAUREEN CAVANAUGH: This is KPBS Midday Edition, I am Maureen Cavanaugh. Budget forecasters were nervous about the possible second just just gouged government shut down. While recovery may be not be a problem as we have feared, it will not be as much help as we have thought. One 2013 economic outlook says that this year our economy needs to rely on its own strength and need to take off the training wheels. I would like to thank my guests Doctor Lynn Reaser, and marked this up box and most of your good to see you. It would like to ask you both to start off with your reaction to the pipe partisan bipartisan debt budget deal that the Council is expected to vote on tomorrow? LYNN REASER: Some relief because uncertainty is the worst element that can in Impact in economy. We should be ready for board drastic cuts across the board some of the major reductions have been avoided at this point. MAUREEN CAVANAUGH: There've been some of the people we've talked about on the show talking about sequestration and cuts to research and defense. But you see this budget? MURTAZA BAXAMUSA: San Diego has been the this or disproportionately affected by the government shut down and sequestration. I see that there is a great leave here and hopefully we will grow totally restored. MAUREEN CAVANAUGH: This deal does not accrue include an extension to unemployment benefits which sums say some of them expire at the end of this month if there's no deal than the road, what impact do you see here in San Diego if those benefits for a long-term unemployment expire? LYNN REASER: It will be a hardship on those individuals searching for work across the country, or about 4 million people who have been out of work for six months or longer, and that long-term unemployment is an issue because people are also probably more likely to take more jobs just to get some kind of income coming through the door. MAUREEN CAVANAUGH: We see the potential for these unemployment benefits to expire, and we have just seen a cut through food assistance, is this some sort of strange that we are seeing pop hope through the government shrinking? MURTAZA BAXAMUSA: There is not much hope that on a statewide level will we see on July 1, the minimum wage going up to nine dollars an hour, that might help a hundred thousand San Diego low-wage workers. MAUREEN CAVANAUGH: The subtitle of your economic force force cast asks the question if it's time to take off the training wheels, what does that mean? LYNN REASER: In the past five years we have had tremendous stimulus around the financial crisis, yet initial tax cuts and spending increases and the Federal Reserve has a lot of money and pushed interest rates down to zero, and now there is possibility they will begin to start to pull back some of that in the upcoming weeks. For San Diego, defense spending has peaked in the country, we fit in well with the undergone some long-term strategy, but there will be some impact shrinking the defense budget. MAUREEN CAVANAUGH: Tell us more about the federal reserve. What do it now change gears? LYNN REASER: The federal reserve is now putting money and taking the balance sheet you about $4 million. It wants to prevent another big bubble in the financial markets and prevent inflation down the road, it wants to get back to a more normal situation where it is not buying up the treasury issues that are now coming out each month. MAUREEN CAVANAUGH: Overall your forecast projects growth for the region. LYNN REASER: Were looking at moderate growth, about 7% to six and half percent and there are likely to be jobs spread about through a lot of different industries and high-paying and low-paying jobs, but this should be a better year than you have seen in 2013. MAUREEN CAVANAUGH: Where are we in comparison to the 2008 recession in terms of jobs and the overall in Impact on our economy? LYNN REASER: By the middle of the year, that is August to September that we actually regained all of the jobs lost during the great recession, that will be good is. We're still not seeing large wage increases, but we are beginning to gradually get back. MAUREEN CAVANAUGH: One more question before I go to about the kind of jobs that you are seeing in San Diego. You said across the board a lot of people have always said San Diego is a place where wages are not too high for awful lot of people, do you see that continues? LYNN REASER: They are not very high in much of the industry's first tourism, but we have very high-paying jobs in research and development and defense contractors, we a we are a high-tech leader in sports dedication and we have some very good paying jobs in it did engineering and we also have many software engineering jobs that are not being held. MAUREEN CAVANAUGH: Last week President Adolfo Obama talked about correcting income inequalities in the United States, what you see the impact on it recovering inequality? MURTAZA BAXAMUSA: We saw a 6% drop in income, that is the good days. The bad news is about 95% of that income went to the top 1% and 5% amongst the rest what does that mean it terms of the increase in income? For the top 1% we saw a growth of 31.4% in income, but for everybody else we saw a growth of zero point for percent 0.4% growth in income. We're not seeing the benefits of the growth in the GDP and the economic flowing to the middle class P or that is a structural issue and that is happening whether or not there is a recession. We're seeing our middle class being left behind and I will give you an example, in the last year one and one in three jobs were in the leisure and hospitality's, refer to as the wage jobs. If we see that trend will see greater and greater low-wage jobs being created and fewer high income jobs being created and a complete decimation of the middle class met manufacturing sector peer we defined as the hourglass economy, the city of San Diego struggling with this and economic development strategy was presented that discusses the idea and the issue about hourglass economy and what to do about it. MAUREEN CAVANAUGH: The tension between San Diego's economy and providing more economic equity is captured at least in part in the issue of linkage fees, San Diego city Council boosted those fees and they are charged to commercial construction. The fees are supposed to create affordable housing to workers that will be employed in the buildings being constructed for the Chamber of Commerce is launching an effort to over to the best overturned the boost in the linkage fee on. LYNN REASER: Sometimes these programs aims to help individuals actually hurts the. This in terms of linkage for a fee we're not seeing much of it anyway, and now we're signal even less. In terms of the whole issue of income inequality, we go into this in detail in the past and it appears that more economical roles will help relieve some of that issue at boost the medium incomes, and there are several issues. Income is equality and social mobility. For social mobility you want to give people the opportunity to move up the income ladder, that is in in education issue, we need better jobs and better delivery. MAUREEN CAVANAUGH: To be clear on the linkage fees, you're saying that basically if you were if the link which is the linkage fees causes fewer construction process projects, there will be fewer places for people to live downtown if they want affordable housing is added? LYNN REASER: There will be fewer jobs down there and fewer construction workers and it's basically going to be pushing development outside of the city. MAUREEN CAVANAUGH: To the higher fees put San Diego added economic disadvantage in terms of construction? MURTAZA BAXAMUSA: Dispute was cut in half 1996 to say that if we do that we may get more housing, and as we know we know that more than half of the population lives in a formal housing. When someone cannot afford to make ends meet, especially that option, there would be other options that includes the being more units and making more choices available, and one of the key components is to provide a public subsidy that can be leveraged so we can have more housing built in San Diego. MAUREEN CAVANAUGH: There is a caller on the line, Daniel from Claremont. Welcome to the program. NEW SPEAKER: Affordable housing in the San Diego and I've been involved in that for a long time and I ran for city Council as well, and one of the biggest concerns I have today is that this hourglass thing is really getting bad at the low-end level and one time I tried to get someone at USD to come up with some type of report that would say something that would list the economic cost of being poor and how it much it costs to buy furniture in cars and how much it costs to go to the grocery store and things like that, but sadly to say a lot of leaders here in San Diego don't want to work with community and don't want to help out and when I was in Wisconsin, and they lived in Milwaukee, the city attorney came to group that I was on called ROP and the city attorney said that there are some people not paying taxes and they are harming their tenants, landlords, and they have violations and we're wondering if you're interested in their properties - MAUREEN CAVANAUGH: Sorry but I have to shut you down, but your previous point was very interesting. First is this factor into in economic analysis for San Diego? Is there in economic value attached here? LYNN REASER: It does have the tremendous impact. In 2014 the Wii disc we discussed this in's impact on the economy. We did a study on homelessness does have an enormous costs. We're looking at affordability of housing and continuing to decline as more instruments were interest rates and housing prices the fire, and we duty ñ the address individuals taking jobs in second we have to have training and we need more training in community colleges for specific skills and third we need to address the cost of development and we will be looking at policies and permit costs and delays, all of those factor into the ability of people to buy a home or rent a home and live here and work here in San Diego. MAUREEN CAVANAUGH: I know one thing that you are concerned about right now is the fact that how rents are increasing in San Diego. MURTAZA BAXAMUSA: There was a recent study by Howard University that shows the extreme on affordability of the major metros me rage and the nation, and the San Diego ranks third in this of printers of the region, is important to us to focus on how much of a There is between income and rent here. Income is not going up as fast as Sprint is going up and I will go back to the issue about income mobility because I agree with Doctor Reaser that income mobility is something we'd to focus on, also there was a study done on major metros that had higher inequality also had lower income mobility, and that is a cause of concern, wise income inequality for important, it's because we have difficulty having success for lower incomes to go to higher incomes. MAUREEN CAVANAUGH: Is it clear sailing for San Diego's economy and what are some of the risks that could still threaten recovery? LYNN REASER: We certainly will face further defense cuts. Will not have across-the-board for productions and they will not be as severe as they might have been, but defense spending with the ending of the war of Afghanistan we are looking at different stars moving forward, we also have a major source of uncertainty hanging over households and businesses and it may perhaps still relate to the two-year deal of the budget and we still have much longer range issues to to deal with the lowering debt and tax issues as well, and companies still want to see them more and better sales and activity before they start to wrap up hiring. MAUREEN CAVANAUGH: And you do see our employment rate continued to a down? LYNN REASER: It will go down and we do have a better outlook for tourism and technology, and trade with Mexico and for overall impact of growth of housing, as we've seen housing recovery significantly. MAUREEN CAVANAUGH: This is been a rich conversation and thank you both very much, we've heard a lot about the standard economy and also the economy that does not get talked about quite as much, I want to thank my guests.
Tuesday's tentative budget agreement in Washington could be very good news for San Diego's economy.
Budget forecasters were nervous about the effects of more sequestration cuts, and another possible government shutdown on our fragile recovery.
But while the federal government won't be as big a problem as feared, it also won't be providing as much help as it has over the past difficult years.
Lynn Reaser, chief economist for the Fermanian Business and Economic Institute at Point Loma Nazarene University said 2014 should be positive for the San Diego economy.
Reaser's 2014 Economic Outlook for San Diego says this year, our economy has to begin relying on its own strengths- it has to take off the "training wheels."
Reaser predicts the San Diego region will gain 28,000 jobs next year. That would raise employment above pre-recession levels.
The forecast predicted the technology sector will drive a lot of the job growth, that tourism will grow and the recovering housing market will help.
"We'll likely see a little more moderation in the coming year with home price increases somewhat less than 10 percent," Reaser said. "(That's) about half of what we saw last year. But still, we'll see more home sales, more home buyers, more home building permits, so it should still be a year of recovery for the home-building area."
Even so, there are some areas of concern.
San Diego is still facing the prospect of negative economic pressure from shrinking military budgets, rising college costs and over-regulation, she said.
KPBS business reporter Erik Anderson contributed to this report.
