Santa Barbara County is expected to see flat or even negative GDP growth over the next year, and the long-term outlook for its jobs market is gloomy.
That was the prognosis from the team of forecasters at UC Santa Barbara’s annual Santa Barbara County Economic Summit, which held events for the southern and northern halves of the county on May 3-4.
“All is quite on the Western front,” said Peter Rupert, head of the UC Santa Barbara Economic Forecast Project. He predicts that the county will see its net economic output flat line or shrink slightly this year. The bad news is tempered slightly by the fact that Santa Barbara County experienced a milder recession than the rest of California.
But Santa Barbara County’s dour forecast goes against the fairly optimistic outlook for the nation as a whole. The U.S is expected to experience 2.4 percent to 2.9 percent GDP growth this year, according to forecasters at the Federal Reserve Bank, said David Altig, an economist with the Fed in Atlanta. [Click here to read related story.]
According to data compiled by the UCSB forecasting team, Santa Barbara County’s real GDP grew at an average rate of about 3.6 percent from 2000 to 2005. But since 2005, GDP growth has declined at an average rate of 0.2 percent.
Several industries appear to be driving that decline: In 2010, Santa Barbara County’s utilities sector dropped more than 30 percent, finance and insurance declined 12 percent; and construction slipped 5.4 percent during the recession.
Still, there are bright spots, particularly on the consumer front. The county’s taxable sales are now trending upward again, after five quarters of decline, according to the forecast, and management and information technology companies have increased their output by more than 10 percent. And most of the region’s banks have returned to profitability.
Gloomy forecast for jobs
The labor market is perhaps the biggest drag on a full-blown recovery in Santa Barbara County, Rupert said.
While the county’s unemployment rate fell from 9.4 percent to 8.8 percent from 2010 to 2011 — the first decline since 2006 — Rupert worried that average wages in the county are also falling. Of the top 10 occupations in the county, as ranked by number of people employed, six earn on average less than $40,000 a year.
“This is not good,” Rupert said.
The labor market also presents a double-edged sword for Santa Barbara County, which couples the ritzy retirement hub of the South Coast with the largely farm- and manufacturing-driven north county. Rupert pointed out that while figures from the Employment Development Department suggest that occupations such as farm workers, waiters, cashiers and counter clerks will be the leading job creators in the county going forward, favoring north Santa Barbara County, most of those jobs have average salaries well below $40,000 a year – most are in the $20,000 range.
Total government employment, as well as private-sector leisure and hospitality and farm jobs, is up since 2006, he said. His forecast calls for a gain of about 1,500 non-farm jobs in Santa Barbara County this year, a 1 percent increase.
And South Coast house prices may still “have a way to go down,” Rupert said, noting that the historical rent-to-price ratio is still out of sync with the historical average of 5-6 percent. The county’s employment-to-population ratio – a measure of the percentage of the working-age population that is employed – is “not trending to come back,” he said.
Rest of the region
Rupert’s forecast echoed thoughts from a Ventura County forecast by the Center for Economic Research and Forecasting out of California Lutheran University in Thousand Oaks. That forecast, presented by economist Bill Watkins’ team in late March, stressed that in Ventura County as well, the outlook for head-of-household job creation was dismal.
Ventura County lost 500 net jobs last year, from February 2011 to February 2012, Watkins said, missing his previous estimate that the county would see some job growth in each quarter of 2011. As in Santa Barbara County, job losses were generally in relatively well-paying sectors, while gains tended to be concentrated in lower-paid jobs.
“At this point, one has to wonder where Ventura County growth, if there is to be any, will come from,” Watkins said in the written forecast that accompanied the March event.
Los Angeles-based forecasting firm Beacon Economic presents an outlook for San Luis Obispo County and the Central Coast on June 7 in Paso Robles.