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Forecast: Ag-centric cities to lead region in slow recovery

By   /   Friday, January 4th, 2013  /   Comments Off

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Look for the Tri-Counties to show modest economic growth in 2013 that will quicken in the second half of the year. West Ventura County, Santa Maria and Paso Robles are poised to lead the way, with real estate becoming an economic driver for the first time in several years.

To be sure, economists interviewed by the Business Times did not expect the region to set any land speed records. But areas that have managed to find a balance between quality of life, viable employers and housing within the reach of the middle class show opportunities for expansion.

“Ventura County will have the best opportunity to grow out of the three because they’ve got lots of housing in the pipeline that they can build as soon as demand picks up, they’ve got lots of employment opportunities, and they’ve got a technology corridor that could really expand,” said California Economic Forecast Director Mark Schniepp. “The last few labor reports on Ventura County have been stellar.”

Bill Watkins, head of the California Economic Research and Forecasting Center at California Lutheran University, is less optimistic. He calls for “slow economic growth, even slower job growth and the probability of recession still uncomfortably high.”

Watkins has taken to calling California’s coast “The Geriatric Coast” because its population is trending much older than the general population. He said the prospects for growth in development-averse cities in the Tri-Counties are much more limited.

“The key is attracting the population that can prosper in that sort of environment. Santa Barbara and Montecito are a classic example: A bunch of rich people who made their money someplace else. But so are Napa and Monterey. It turns out the world has a lot of these people,” Watkins said.

Schniepp agreed that demographics are a major constraint. Residents tend to buy homes and hang on to them far longer than average.

“The real problem that we have in Santa Barbara County is that a lot of our homes are filled up with people who aren’t working,” he said. “It’s much higher in Santa Barbara County than it is in the state. It’s sad to see. The workforce can’t be accommodated because all the homes are filled with people who aren’t in the workforce.”

One of the most troubling structural economic indicators might be little league enrollment. “It has social implications,” Schniepp said. “Households that are in late middle age or past it don’t spend as much. Spending is lower, and you see that in our retail numbers because they don’t grow very fast, and a lot of that is attributable to tourism. The little leagues are losing enrollment. We don’t have that many kids any more.”

Increasingly, the places that do have young families are parts of Oxnard and Ventura, Santa Maria and Paso Robles. Watkins said the rise of Paso Robles is the most remarkable in the region because it was a dusty cow and barley town with a root beer stand as recently as a few decades ago.

“Paso Robles has changed itself,” he said. “It’s got high-income wine people there, and yet it’s still got homes for the middle class.”

The general high cost of housing in the region means that it’s typically only large employers that can provide salaries that are high-enough and stable enough to support a commitment to buying a home. Schniepp said that means that it’s important to watch not just how many jobs are created, but the quality of those jobs.

“We’re creating more jobs in Santa Barbara County than the pace of the state as a whole, but many of those jobs are temporary or clerical or secretarial. They don’t tend to be permanent,” he said. “We’re seeing some recovery in the professional services sector, and some of the tech companies are doing better. But a lot of that is being offset by downsizing at Raytheon and the bombshell dropped at Santa Barbara Bank & Trust.”

Schniepp said to look for unemployment levels that are below state averages in Santa Barbara and San Luis Obispo counties, but not for good reasons. Housing costs are so high that people who lose jobs in those counties typically just leave.

“There’s not enough adjacent firms in the sector to absorb you,” Schniepp said. “That’s why our unemployment rate never gets that high. You don’t get counted here.”

In San Luis Obispo County, the economists agreed that the heavily state funded employers — Cal Poly San Luis Obispo, the California Men’s Colony, Atascadero State Hospital and a former youth correctional facility whose fate is still unclear — are likely to remain stable. In particular, Proposition 30 has likely staunched the job bleeding.

“The university, while their growth is constrained, is safe this year, I think” Watkins said. “The immediate problem and risk of job losses in these places went down, but long run we still have big challenges in financing California.”

While there are concerns about what could happen to jobs at Ventura County’s naval installations, economists see tourism as a continuing bright spot.
“The tourism industry is doing very well, and that’s continuing to help carry Santa Barbara and San Luis Obispo to some extent. Even with the slowdown, we still see lots of visitors because of the strength of their currency relative to ours,” Schniepp said.

While 2013 might turn out to be a modestly good year for growth, the pall that hangs over the entire California coast remains. Unless more housing and development are allowed, the entire coast will continue to age faster than the general population, with an economy increasingly divided between older and wealthier property owners and low-paying jobs to service those property owners. The communities that buck those trends stand to prosper.

“We’ve deferred it for so long, the population has continued to grow, and we’ve got this huge 20-something population hat needs housing,” Schniepp said.

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