California Economic Forecast predicts no recession in 2016 or 2017
Economic indicators do not point to a recession this year or next, according to research from the California Economic Forecast.
Nationwide, consumer confidence is near a seven-year high and corporate profits are trending up, which slumped prior to the Great Recession. And even though more people are buying cars and homes, household debt levels are tame, said Mark Schniepp, director of the California Economic Forecast. The current seven-year economic expansion is old but it’s not running on fumes, he said.
“We really don’t have any imbalances or bubble concerns. Therefore, at this time, we don’t see any recession — none. If you were wondering about 2017 and all those blogs and articles (forecasting a recession), well forget about them,” Schniepp told a room of about 300 people at the Hyatt Regency in Westlake Village Sept. 8 during the 2016 Los Angeles County and Ventura County Economic Outlook.
Wages are rising and although the threat of higher interest rates looms, full or nearly full employment will continue to spur spending, according to the report. Even though this year’s GDP growth of about 1.6 percent has some concerned that a recession is on the horizon, 2017’s projected 2.9 percent GDP growth should stymie those concerns, Schniepp said.
Similar to his February forecast, Schniepp said that Ventura County’s economy is lagging behind its tri-county and Southern California neighbors.
While Ventura County decisively rebounded from the Great Recession, overall economic growth has been fading in recent years, California Economic Forecast data shows. Hotel occupancy is at record levels, averaging 80 percent this year. There are more than 11,000 approved units in the entitlement pipeline, but there are few projects that are moving forward at this time, according to the report. Although the vacancy rate for Ventura County office space is at its lowest level since the peak of the Great Recession, it’s still higher at 15.9 percent than any other Southern California or tri-county community.
Los Angeles County has one of the strongest job markets of all time, commercial real estate is red hot, and tourism, entertainment, technology and its export market all have tremendous expansion potential, Schniepp said.
“Ventura County is the lagging child of Southern California,” he said. “Most economic indicators are rising in Ventura County — jobs, salaries, spending, utilization of space — but the numbers are just simply disappointing when compared to its neighbors. (Save Open Space and Agricultural Resources) has materially constrained new development of housing and non-residential building. Also, the permitting and regulatory environment has become a major obstruction to new development.”
Other speakers included Stephen Basham, senior market analyst of CoStar Group, who discussed the bustling national multifamily sector, and Eric Bergh of the Calleguas Municipal Water District, who talked mostly about the California Water Fix, a plan that aims to bolster water resources by building twin tunnels that carry fresh water from the Sacramento River under the Sacramento-San Joaquin Delta toward the intake stations for the State Water Project and the Central Valley Project.
Schniepp expects employment growth in Ventura County to continue to slow in 2017, salaries to rise, building to gradually increase and median home values to surge, which will make it difficult to recruit and retain workers, he said.
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