San Luis Obispo County’s economy is on the mend.
Employment is growing, consumers are gaining confidence and the residential real estate market is on its way to recovery following a credit-and-spending bubble that plunged the nation into recession. County agriculture continues to provide a boost, with growth in the wine industry supporting local leisure and hospitality and retail industries, according to the 2011 Central Coast Economic Forecast Mid-Year Update.
The county, the fastest growing population center on the Central Coast (including Monterey and Santa Barbara counties), saw wages increase from third-quarter 2009 to third-quarter 2010, a sign that the financial health of consumers is rebounding two years after economists declared the recession over.
“Jobs are starting to bounce back, and there’s been an increase in consumer spending locally,” said Christopher Thornberg, founding principal of Beacon Economics, the Southern California firm that presented Thursday’s forecast at Atascadero’s Galaxy Theatres.
The county’s total nonfarm employment grew for three straight months, posting 97,900 positions in March of this year. That month, the total number of nonfarm jobs reached the highest level of employment here since employment hit bottom in August 2009. That’s a total not seen since May 2009, according to the forecast.
The employment growth has been primarily in two of the largest sectors in the county — leisure and hospitality, and retail trade — which gained 600 jobs and 400 jobs, respectively, over the past year (from March 2009 to March 2010).
As well, taxable sales have risen over the past two quarters, led by automobile sales and transportation.
The tourism industry is another reason for optimism, forecasters said. Pismo Beach, San Luis Obispo and Paso Robles had gains in the first quarter 2011 in their hotel average daily rates and amount of revenue per available room.
While the local real estate market remains soft — with the median home price for existing family homes dropping in the first quarter of this year to $355,000, its lowest post-recession level — more affordable housing is attracting buyers, Thornberg said. He said he’s fine with the market “sitting in neutral for a while,” adding that it will be some time before prices grow, as distressed sales have flooded the market, keeping supply high.
“As the problems in the market work their way out of the system, prices will begin to rise,” the forecast said.
“The worst is behind us,” said Thornberg, noting that the county never got hit as hard with mortgage defaults as other communities.
State budget concerns
Although the economy is improving, Thornberg and other speakers said there are lingering concerns. Chief among them are trends in the state and U.S. economy that will have an impact on local communities.
In California, ending the budget crisis will be a key ingredient to ensure that local governments have much-needed revenue. Allan Zaremberg, president and CEO of the California Chamber of Commerce, and David Mullinax, regional public affairs manager for the League of California Cities, both offered their take on how dysfunction at the state government level impedes progress on reforms. Zaremberg said caps on spending as well as pension reform must be part of the equation if California is to solve its fiscal challenges.
As for the U.S. economy, the ballooning federal deficit and consumers spending too much and not saving enough of their disposable income, due in part to low tax rates, will pose problems, Thornberg said.
But despite economic weaknesses in the first half of this year, Thornberg said the nation, state and county are moving in the right direction, albeit slowly.