Although signs abound that the San Luis Obispo County economy is recovering from the recent recession, the pace of that recovery has left something to be desired. While recent employment reports have been increasingly positive for the state overall, employment growth in SLO County has been in the doldrums.
Most local job sectors continue to face difficulty. The county’s “other services” sector shrank by 600 jobs in June, and retail, trade and tourism fell by 900 positions collectively. The June contraction was relatively broad-based with education and health care, manufacturing, financial activities, and professional and business services all posting declines in payroll jobs. A notable exception was agricultural employment, which grew by 1,000 jobs. Construction also added 100 jobs.
Indeed, a variety of local economic data illustrate that things are not all bad.
SLO County, with a 3.7 percent rebound in nonfarm employment, is still outpacing California overall in employment growth since hitting bottom. And while ongoing difficulties in state and local government budgets have squeezed California’s public sector, SLO County does not appear to face the same fiscal stress as some localities. The rating agency Fitch recently reaffirmed the county’s AA-plus credit rating, citing a solid tax base and stable economy. This is welcome news in the context of several recent municipal bankruptcies across the state — and the recent downgrading of Grover Beach’s credit rating by Standard & Poor’s. Overall in SLO County, the 2012-13 proposed budget shows that receipts are up for 2011-12 and are projected to grow into 2012-13. The county still remains 3.2 percent below its 2009-10 peak, but things are improving.
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Consumer spending also shows no signs of abating, with solid growth of 13.6 percent on a fiscal year-to-date basis, according to HdL Companies. And although business spending is down 6 percent through the first three quarters of fiscal 2012, overall taxable receipts in the county are tracking 10.5 percent higher than they were last fiscal year. Additionally, the region’s tourism sector is well on its way to recovery. The industry has a ways to go before reaching its prerecession employment peak, but data from the California Tourism bureau shows that hotel performance/demand is the strongest it’s been in many years — even before the recession. Average daily room rates hit $116 in June, exceeding the 2007 peak of $113. And hotel occupancy in the region climbed to more than 67 percent last month — its highest point since before 2005.
The local real estate market shows real signs of improvement, as well. Newly released second-quarter data confirms that home prices in SLO County appreciated fairly consistently through June 2012. Home sales are up more than 50 percent from the low point they sank to at the end of 2007. And, critically, both defaults and foreclosures continue to fall steadily. Distressed mortgages remain elevated relative to historical norms, but the improvement is a clear indication of better days ahead.
Commercial real estate markets have also turned the corner with local rents up 2.4 percent in the office market to 9.3 percent in the industrial market to 10.6 percent in the retail market since hitting bottom in 2010. Vacancy rates are down by between 0.7 and 2.3 percentage points across the commercial markets.
And although residential and nonresidential construction permits continued to decline through the end of 2011, new construction is expected to ratchet up in the next few years. There are already signs of activity, with the recent approval to build a new Walmart in Atascadero and plans coming together for expansion of the Cold Canyon Landfill.
The economic recovery along the Central Coast has been volatile. And SLO County’s labor market has struggled recently. But indications of economic healing and future growth are evident in agriculture and tourism, and in the improving local real estate markets. The county cannot declare itself fully recovered, but it’s clearly time to look forward, not backward.
Jordan G. Levine is an economist and director of economic research at Beacon Economics LLC, an independent economic research and consulting firm. Beacon Economics has a long-standing relationship with the Central Coast Economic Forecast and provides CCEF with comprehensive data and analysis on the Central Coast region. CCEF is an independent organization dedicated to understanding and supporting the San Luis Obispo County economy.