Local Economic Report. Winter 2011

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1 Local Economic Report Winter SONOMA COUNTY

Winter 11 Local Economic Report February 11 The Sonoma County Economic Development Board (EDB), in partnership with the Sonoma County Workforce Investment Board (WIB), is pleased to present the

Highlights from this Local Economic Report include: Sonoma County s recovery will strengthen in 11, led by tech, tourism and the new stability in wine-related industries.

2 Winter 11 Local Economic Report February 11 The Sonoma County Economic Development Board (EDB), in partnership with the Sonoma County Workforce Investment Board (WIB), is pleased to present the Winter 11 Local Economic Report. Our research partner, Moody s Analytics, provided most of the research for this report. Highlights from this Local Economic Report include: Sonoma County s recovery will strengthen in 11, led by tech, tourism and the new stability in wine-related industries. Accelerating job growth is forecasted to push the unemployment rate below 1% by the end of 11. Technology, particularly medical device firms, will drive growth in Sonoma County, especially as the world s elderly population increases and health care coverage is expanded. A smaller 1 wine grape harvest and improved consumer confidence and spending are two favorable indicators for Sonoma County s wine-based industries. Because of the extreme weather, inventories of 1 wines will be limited, which will allow high-priced wines to be profitable. House prices have avoided a sharp decline following the end of federal and state tax credits, but remain close to their low reached in the first half of 9. Thank you for your interest in the Economic Development Board s research. For additional information, questions, comments, or suggestions please contact us at (77) or visit. Sincerely, Ben Stone Executive Director 11 Sonoma County Economic Development Board. The Economic Development Board (EDB) believes all data contained within this report to be accurate and the most current available, but does not guarantee its accuracy or completeness. Use of data from an outside source does not represent an endorsement of any product or service by the EDB, its members or affiliates. This publication can be made available in alternative formats such as Braille, large print, audiotape, or computer disk. Please direct requests to (77) and allow 7 hours for your request to be processed. This report was prepared by Sarah C. Deming.

3 SONOMA COUNTY EMPLOYMENT VITALITY GROWTH RANK RELATIVE RANK % 138 =1% Best=1 Worst=38 5th quintile 9-1 RELATIVE COSTS LIVING BUSINESS th quintile 96% Best=1, Worst=39 17% =1% RELATIVE EMPLOYMENT PERFORMANCE (1995=1) F 11F 1F 13F 1F LIFE CYCLE PHASE Growth/Mature SON Indicators Gross metro product (C$B) % change Total employment () % change Unemployment rate Personal income growth Population () ,53 1,3 1,598 1, Single-family permits ,9 1,53 1, , Multifamily permits Existing-home price ($ths) ,77 11,619 1,695 1,1 7,51 5,1 7,39 Mortgage originations ($mil) 5,,857 3,38 3,687, Net migration () ,3 1,67 1, ,53,17 Personal bankruptcies,71,83,815,68,67 STRENGTHS & WEAKNESSES STRENGTHS Emerging technologies, including clean energy, add to core medical devices and network clusters. Highly educated workforce relative to California and the boosts income and spending levels. WEAKNESSES Earlier revenue declines keep winery and hotel defaults at elevated levels. Sharp job losses in finance and other officeusing employment are a drag on office markets. CURRENT EMPLOYMENT TRENDS NOVEMBER 1 % change yr ago, 3-mo MA Total Construction Manufacturing Trade Trans/Utilities Information Financial Activities Prof & Business Svcs. Edu & Health Svcs. Leisure & Hospitality Other Services Government FORECAST RISKS SHORT LONG RISK-ADJUSTED TERM TERM RETURN, % X X UPSIDE Developing and aging Asia provides growing markets for IT and medical device makers. Improving economic growth and consumer confidence increase wine sales and visitors. DOWNSIDE Decline in foreclosure rate slows, extending price declines further than forecast. Still-high vacancies and slow office-using job growth delay new construction. ANALYSIS Recent Performance. Sonoma County s recovery modest, recent improvements are spread throughout key tech, tourism, and wine industries. Small employment gains and a stabilizing labor force have pushed the unemployment rate closer to 1% higher than the but more than two percentage points below California s. Improvements in the county s real estate markets are modest. House prices have avoided a sharp decline following the end of federal and state tax credits, but of 9. Similarly, residential construction permits are no longer falling but remain at multi-decade lows. Tech. will remain a driver of growth as the world s elderly population increases and healthcare coverage is expanded in the Medtronic s Santa Rosa-based cardiovascular equipment division has received and foreign approval for two new medical devices Slowing growth in demand for IT equipment will lessen the positive contribution of the county s elec tronics manufacturers following the strong rebound - including strong interest for productivity-enhancing networking equipment manufactured in Sonoma County has helped to lower the industrial vacancy rate since the end of 9 by more than a percentage point, according to Keegan & Coppin Co. Outsourc ing risks further slowing the pace of tech s growth in the metro area. JDSU s Santa Rosa-based opticalcoating division opened a $ million plant in China in October to serve its growing Asian markets. Wine. Stronger growth in 11 includ- - ing and a smaller 1 wine grape harvest point toward an improved outlook for Sonoma County sales during the recession. Extreme summer and fall weather resulted in a large loss of wine grapes and will limit the inventories of 1 wines, helping bottles priced $ or more in November jumped - ing back up as it outpaced the total 6% increase in Tourism. also help Sonoma County s leisure and hospitality industries as business and personal travelers return to area hotels and resorts. Improvements have already occurred as evidenced by an estimated 7% to 8% increase in hotel revenues, according to the Sonoma County Tourism Bureau in 1. Passenwas also up 1% from a year ago. Despite the improved near-term outlook for tourism, demand for new hotels will take longer to recover. Although the number of county hotels in 13 remain in default keeping downward pressure on prices for existing properties. A permit for hotel construction has not been issued since 8. Sonoma County s recovery will strengthen in 11, led by tech and tourism and a long- awaited stability in wine-related industries. Accelerating job growth will push the unemployment rate maintain its high quality of life and desirability for high-skilled workers. However, high housing costs will keep the county as a below-average performer at times over the extended forecast. Eduardo J. Martinez February 11

4 TOP EMPLOYERS Kaiser Permanente, St. Joseph Health System 1,781 Agilent Technologies 1,35 Medtronic CardioVascular 1, Sutter Medical Center of Santa Rosa 1,97 Safeway, Inc. 1,8 Amy s Kitchen 9 River Rock Casino 66 Wal-Mart Stores, Inc. 65 Kendall-Jackson Wine Estates 6 AT&T 597 Mary s Pizza Shack 575 Washington Mutual 56 Lucky 55 5 Wells Fargo & Company 9 State Farm Insurance Company 75 Hansel Auto Group 7 JDS Uniphase Corporation 33 Korbel 6 Source: North Bay Business Journal: Book of Lists, January 1 PUBLIC Federal 1,667 State 5,6 Local 3,8 9 EMPLOYMENT & INDUSTRY 1% 8% 6% % % % Not due to INDUSTRIAL DIVERSITY Most Diverse (). Least Diverse EMPLOYMENT VOLATILITY Relative to 9% Due to COMPARATIVE EMPLOYMENT AND INCOME Sector % of Total Employment Average Annual Earnings SON CA SON CA Mining.1%.%.5% $,13 $1,5 $117,938 Construction 5.7%.%.6% $6,718 $66,97 $5,71 Manufacturing 11.7% 9.1% 9.1% $68,9 $8,96 $7,637 Durable 6.5% 6.3% 61.5% nd $91,1 $71,783 Nondurable 53.5% 37.7% 38.5% nd $69,73 $68,675 Transportation/Utilities.3% 3.% 3.7% $57,53 $6,91 $59,31 Wholesale Trade 3.9%.6%.3% $69,196 $75,63 $73,175 Retail Trade 1.% 1.8% 11.1% $3,867 $35,686 $9,661 Information 1.5% 3.%.1% $57,83 $16, $88,888 Financial Activities.5% 5.7% 5.9% $31,75 $8,69 $8,63 Prof. and Bus. Services 11.% 1.6% 1.7% $6,67 $66,11 $59,6 Educ. and Health Services 1.% 1.% 1.7% $5,55 $5,73 $7,833 Leisure and Hosp. Services 11.6% 1.6% 1.% $,76 $8,69 $,976 Other Services 3.6% 3.%.1% $,8 $3,735 $3,18 Government 17.5% 17.7% 17.% $63,73 $73,6 $63,6.8 Sources: Percent of total employment Moody s Analytics & BLS, 9; Average annual earnings BEA, 8 16 SON 1 MIGRATION FLOWS INTO SONOMA COUNTY NUMBER OF MIGRANTS San Francisco, CA,599 Oakland, CA 1,6 Sacramento, CA 711 Los Angeles, CA 6 Vallejo, CA 5 Napa, CA San Jose, CA 363 San Diego, CA 311 Riverside, CA 78 Santa Ana, CA 35 Total In-migration 13,99 FROM SONOMA COUNTY San Francisco, CA 1,9 Oakland, CA 976 Sacramento, CA 96 Napa, CA 395 Los Angeles, CA 39 Vallejo, CA 35 San Jose, CA 339 San Diego, CA 336 Portland, OR 9 Riverside, CA 7 Total Out-migration 13,386 Net Migration 113, 3,, 1, -1, -, -3, -, Net Migration, SON Domestic -5,7 -,73 1,38 1,855 Foreign 1,77 1,555 1,5 1,53 Total -3,6-518,96 3,378 Sources: IRS (top), 8; Census Bureau, MOODY S RATING HOUSE PRICES SON Source: FHFA, 1996Q1=1, NSA CREDIT QUALITY Aa1 COUNTY LEADING INDUSTRIES NAICS INDUSTRY EMPLOYEES () GVSL State & Local Government Full-Service Restaurants Beverage Manufacturing General Medical and Surgical Hospitals Grocery Stores Limited-Service Eating Places 5.3 FR Farms Traveler Accommodation 3.3 PH Private Household Workers Account., Tax Prep., Bkkeep. & Payroll Srvcs Services to Buildings and Dwellings Department Stores Employment Services. 38 Building Equipment Contractors. High-tech employment 8.7 As % of total employment.7 Sources: BLS, Moody s Analytics, 9 3 PER CAPITA INCOME 7,755,38,673 SON CA Source: Bureau of Economic Analysis, 8

5 Graphical Analysis Core Industries Begin to Lift Labor Market Unemployment rate, % 1 1 California Sonoma County Source: Bureau of Labor Statistics End of Federal Tax Credit Weighs on Housing Existing single-family house price, % change yr ago 3 California 1-1 Sonoma County Source: California Association of Realtors Loss of IT Manufacturing Jobs Moderates Sonoma County computer and electronics manufacturing employment % change yr ago (L) IT investment, $ bil SAAR (R) Sources: Bureau of Labor Statistics, Moody s Analytics Local Skills Are High but Trail Tech Areas Population over 5 yrs old with a bachelor s degree, %, 9 San Francisco Santa Clara Sonoma California Source: Census Bureau Counties Travelers Begin to Return to Sonoma County Sonoma County leisure and hospitality employment % change yr ago (L) consumer confidence index, 1985Q1=1 (R) E 11F 1F 13F Sources: Bureau of Labor Statistics, Conference Board, Moody s Analytics Demographic Drivers Improve Population Growth 6 5 Net domestic migration ths (L) 3 Population, % change (R) Source: California Department of Finance

6 5-Year Forecasts for Sonoma County Gross Metro Product, Percent Growth Personal Income, Percent Growth 5% 1% % 3% % 1% 8% 6% % % % -1% -% -3% -% % -% -% -5% '3 ' '5 '6 '7 '8 '9 '1F '11F '1F '13F '1F -6% '3 ' '5 '6 '7 '8 '9 '1F '11F '1F '13F '1F % 3% Total Employment, Percent Growth $, Mortgage Originations ($ Millions) % 1% % $15, -1% -% -3% $1, -% -5% -6% $5, -7% -8% '3 ' '5 '6 '7 '8 '9 '1F '11F '1F '13F '1F $ '3 ' '5 '6 '7 '8 '9 '1F '11F '1F '13F '1F Net Migration (Thousands) 3 Personal Bankruptcies '3 ' '5 '6 '7 Source All: Moody s Analytics '8 '9 '1F '11F '1F '13F '1F '3 ' '5 '6 '7 '8 '9 '1F '11F '1F '13F '1F 5

Local Economic Report

Local Economic Report Fall 21 21 SONOMA COUNTY Fall 21 Local Economic Report November 21 The Sonoma County Economic Development Board (EDB), in partnership with the Sonoma County Workforce Investment Board