Local Economic Report

Transcription

1 EDB Economic Development Board economy Local Economic Report Fall 28 E c o n o m i c D e v e l o p m e n t B o a r d 4 1 C o l l e g e Av e n u e S u i t e D S a n ta R o s a C A

2 EDB Economic Development Board With Acknowledgment and Appreciation to local key businesses supporting Economic Development: Chairman s circle: Underwriters: County of Sonoma General Services, Real Estate Division County of Sonoma Board of Supervisors Permit & Resources Management Health Services Transportation & Public Works

3 28 Fall Local Economic Report October 28 The Economic Development Board (EDB), in partnership with the Workforce Investment Board (WIB), is pleased to bring you the 28 Fall Local Economic Report. Highlights from this Local Economic Report include: Total employment in is faring better than nationwide trends, growing by.8 percent in August 28. Payroll employment has risen over the past six months. The housing market is expected to stabilize around the middle of 29 as supply and demand equalize. The county s median sales price continues to fall, but prices must decrease more before they balance with local household incomes. Local technology-producing industries will bolster the county economy, subject to capital and equity markets volatility. The tourism and leisure industry is limited by the potential recession, and performance will depend on a nationwide economic recovery. Thank you for your continued interest in the EDB s reports. As always, if you have any questions, please feel free to contact us at (77) Sincerely, Ben Stone Executive Director 28 Economic Development Board. The Economic Development Board (EDB) believes all data contained within this report to be accurate and the most current available, but the EDB does not guarantee that this report is accurate or complete.

4 SONOMA COUNTY EMPLOYMENT GROWTH RANK Best=1 STRENGTHS & WEAKNESSES STRENGTHS Improving demographic trends. Household wealth supports credit quality. Housing supply approaching equilibrium with demand. Affordability is improving. CURRENT EMPLOYMENT TRENDS SHORT TERM Worst= st quintile st quintile RISKS LONG TERM LIFE CYCLE PHASE Mature/Decline Best=1 COST OF DOING BUSINESS = 1% 19% COST OF LIVING = 1% RISK-ADJUSTED RETURN, 7-12 Worst=381 VITALITY 297 4th quintile WEAKNESSES House prices are still correcting; affordability remains poor. Basic industries stable but still not contributing to growth. August 28 Employment Growth -.17% UPSIDE Oil falls further below $1, supporting consumer confi dence and causing less disposable income to go to gasoline. Venture capital, broad Bay Area growth, and local policy initiatives spark technology industries. DOWNSIDE Potential recession limits domestic leisure and business travel. Higher energy prices put a severe limit on domestic visitor arrivals Recent Performance. The economy is holding up better in than in many other parts of California and the nation. Payroll employment has risen over the past six months and is now at a new peak, finally passing the previous peak of the 21 dot-com boom period, with gains across a number of industries. Employment is not rising fast enough, however, to accommodate all job seekers; the jobless rate has risen sharply in recent months so that it now is at its highest since 1995 and is no longer below the average. The pace of homebuilding is at a record low and the median sales price is falling at an accelerating pace. Household credit quality remains problematic also and there are hurdles still to clear, but the economy has shown resilience in recent months. Technology. Among the industries that will enable the economy to maintain its good performance are its technology-producing industries. International demand provides considerable support for wireless telecom equipment. The presence of venture capital and research talent creates renewed support for the medical technology industry, as evidenced by the rebirth this year of medical device maker TriVascular2, which hopes to start product trials by next year. Emerging demand for solar technology and other green industries adds further potential for s tech-producing cluster of industries. Professional services, which include research and development and manufacturing, are net gainers of jobs in recent months. Tourism and wine. Wine and tourism have not been as resilient and will likely have to wait for a broader recovery of the economy. The impact is being felt in reduced demand for high-end wine in restaurants and retail outlets, causing profit growth to slow. Similarly, drivein tourist arrivals have been weak because of the price of gasoline and the weak economy of much of California. If the economy is able to stabilize next year, there will be an additional Relative Employment Performance (1993=1) Indicators Gross Metro Product, C$B % Change Total Employment () % Change Unemployment Rate Personal Income Growth Population () ,717 1,35 1,53 1,342 1,598 1, Single-Family Permits ,168 1,871 1, , Multifamily Permits Existing Home Price ($Ths) ,66 12,255 17,825 12,155 12,457 9,552 6,35 Mortgage Originations ($Mil) 4,62 4,26 4,79 4,339 4, Net Migration () ,183 1,223 1,3 1,267 1, Personal Bankruptcies ,18 1, Total Construction Manufacturing Trade Trans/Utilities Information Financial Activities Prof & Business Svcs Edu & Health Svcs Leisure & Hospitality Other Services Government % change year ago, 3 mo. MA % ANALYSIS draw for tourists: A $4 million expansion of the River Rock Casino is under way, giving a near-term boost to the construction industry Housing. s housing market is inching its way back to stability, which is expected by mid-29. The number of new residential construction permits is at a record low. This, more than anything, will help bring supply and demand back into balance. Sales prices are falling, particularly at the low end of the market, where affordability has been dismal. The median sales price has fallen 36% from peak since late 25. Prices need to fall at least 1% more before they are in balance with household incomes. The conservatorship of Fannie Mae and Freddie Mac by the federal government adds some upside potential to the local housing market since it brings additional mortgage lending liquidity and lower interest rates, making the higher conforming loan limits instituted earlier this year more effective tools of support for the housing market. Risks. The nearly frozen global capital markets could very well bring business investment spending and consumer spending to a halt, directly weakening demand for local tech-producing industries, as well as consumer-based tourism and fine wine. Further, the volatility of equity markets can limit IPOs, thereby reducing venture capital appetite for local emerging technologies. Current fundamentals bode well for Sonoma County s economy as housing approaches a new balance and investment supports tech industries. The pace of near-term economic recovery will also depend closely on the global economy and on the pace of domestic investment. If all goes well, the local economy may bounce back strongly. But all must go well, with the help of federal and global policymakers. Steven G. Cochrane September 28 Moody s Economy.com help@economy.com Précis METRO September DataBuffet MSA code: MSON SAA SON Forecast

5 27 TOP EMPLOYERS Kaiser Permanente 2,3 St. Joseph Health System 2,166 Agilent Technologies 1,4 Medtronic CardioVascular 1,2 Sutter Medical Center of Santa Rosa 1,97 Safeway, Inc. 1,82 Amy's Kitchen 95 Kendall-Jackson Wine Estates 92 Home Depot 7 Hansel Auto Group 681 Lucky 677 River Rock Casino 651 JDS Uniphase Corporation 65 Wal-Mart Stores, Inc. 65 AT&T California 597 Mary's Pizza Shack 575 Washington Mutual 56 Wells Fargo 512 Korbel 52 Pacific Gas and Electric Company 5 Source: North Bay Business Journal -, February 28 Public Federal... 1,99 State... 5,217 Local... 23,922 EMPLOYMENT & INDUSTRY INDUSTRIAL DIVERSITY EMPLOYMENT VOLATILITY DUE TO FLUCTUATIONS 1% 8% 6% 4% 2% % Not due to 84% Most Diverse () Least Diverse Due to.48 RELATIVE TO 18 SAA SON 1 Into San Francisco, CA Oakland, CA Sacramento, CA Los Angeles, CA Napa, CA Vallejo, CA San Jose, CA San Diego, CA Riverside, CA Santa Ana, CA Total Inmigration MIGRATION FLOWS From San Francisco, CA Sacramento, CA Oakland, CA San Jose, CA Napa, CA Vallejo, CA Los Angeles, CA San Diego, CA Phoenix, AZ Portland, OR Total Outmigration Net Migration Number of Migrants 2, ,794 1,837 1, ,98-2,186 Sector Construction Manufacturing Durable Nondurable Transportation/Utilities Wholesale Trade Retail Trade Information Financial Activities Prof. and Bus. Services Educ. and Health Services Leisure and Hosp. Services Other Services Government COMPARATIVE EMPLOYMENT AND INCOME % of Total Employment Average Annual Earnings SON CA US SON CA US Sources: Percent of total employment - Moody s Economy.com & BLS, 27; Average annual earnings - BEA, HOUSE PRICES Source: OFHEO, 1987Q1= 1, NSA MOODY S RATING SON SAA CREDIT QUALITY County 7.6% 5.9% 5.5% 11.7% 9.6% 1.1% 48.% 63.4% 63.5% 52.% 36.6% 36.5% 2.4% 3.3% 3.7% 4.1% 4.7% 4.4% 12.6% 11.1% 11.3% 1.6% 3.1% 2.2% 4.9% 6.% 6.% 12.1% 14.9% 13.1% 12.4% 11.% 13.3% 1.9% 1.2% 9.8% 3.3% 3.4% 4.% 16.3% 16.5% 16.1% Aa2 $63,814 $63,26 $47,439 $69,831 $83,24 $7,956 nd $91,355 $71,424 nd $68,295 $7,69 nd $73,316 $58,157 $62,361 $7,192 $67,687 $32,684 $34,478 $27,715 $6,749 $1,37 $82,715 $39,411 $54,274 $53,19 $45,837 $6,888 $54,2 $47,846 $48,849 $42,114 $19,242 $25,31 $2,625 $25,514 $25,926 $23,87 $59,115 $67,36 $57,889 LEADING INDUSTRIES NAICS Industry Employees () GVSL State & Local Government Full-Service Restaurants Beverage Manufacturing General Medical and Surgical Hospitals 6.2 FR Farms Limited-Service Eating Places Grocery Stores Account., Tax Prep., Bkkeep. & Payroll Srvcs Traveler Accommodation Services to Buildings and Dwellings Building Finishing Contractors Employment Services Department Stores Residential Building Construction Building Equipment Contractors 2.8 High-tech employment 9.1 As % of total employment 4.5 Sources: BLS, Moody s Economy.com, 27 Sources: IRS (top), 26; Census Bureau, 27 PER CAPITA INCOME SON SAA CA Source: Bureau of Economic Analysis, 26 Moody s Economy.com help@economy.com Précis METRO September , -1,5-2, -2,5-3, -3,5 43,318 Net Migration, SON SAA Domestic -3,84-5,247-5,114-2,553 Foreign 2,81 2,86 2,171 2,136 Total -1,723-3,161-2, ,626 36,

6 Graphical Analysis s House Prices Still Falling Consumer Credit Conditions Have Deteriorated Case-Shiller single-family house price index % change year ago Sources: Fiserv Lending Solutions, OFHEO Delinquency rate, first mortgages, % of value Sources: Equifax, Moody's Economy.com California -1 Mid-tier High-tier Tier breaks, 28Q2: High-mid=$5, Mid-low=$356, Low-tier Ample Housing Supply Remains in Modest Rebound in Commercial Construction yr. moving sum, ths Residential construction permits Construction permits, $ mil, 12 mo. moving sum Source: CIRB Office 2 Household formations Retail Housing Affordability Back to 2 Level but Still Low 18 High and Rising Labor Force Participation in California 6 % of median sales price that median-income earning family can qualify for a standard fixed rate mortgage California 48 Labor force participation rate: Labor force/population Sources: BLS, Census, Moody's Economy.com Moody s Economy.com help@economy.com Précis METRO September

7 5 Year Forecasts Gross Metro Product, Percent Growth Personal Income Growth 5% 4% 3% 2% 1% % '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 8% 7% 6% 5% 4% 3% 2% 1% % '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 Total Employment, Percent Growth Mortgage Originations ($Mil) 3.% 2.5% 2.% 1.5% 1.%.5%.% -.5% -1.% -1.5% -2.% '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 $2 $15 $1 $5 $ '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 Net Migration (Thousands) Personal Bankruptcies '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 5

8 EDB Economic Development Board With Acknowledgment and Appreciation to local key businesses supporting Economic Development: Chairman s circle: Underwriters: County of Sonoma General Services, Real Estate Division County of Sonoma Board of Supervisors Permit & Resources Management Health Services Transportation & Public Works