News - Local

Published: Sunday, Jun. 21, 2009

Jobs outlook shows promise in San Luis Obispo County

Local employment should begin to grow again next year and appears in better shape than in many other areas, report says

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San Luis Obispo County will continue to shed jobs through this year, start gaining jobs early next year and reach its pre-recession employment peak three years from now, a top economic forecasting firm says in a new report.

While local jobs will remain a casualty of the recession a while longer, the county is faring better than most metropolitan areas nationwide, and even some in California, IHS Global Insight concludes.

Other economists, however, say the state’s estimated $24 billion budget shortfall and sluggish consumer spending may put a damper on a return to a level of employment not seen here in two years.

“There’s a real risk there that, in fact, if you’re heavy in state government and local government, then jobs will grow slower,’’ said Jerry Nickelsburg, senior economist with the UCLA Anderson Forecast.

The San Luis Obispo-Paso Robles metropolitan area — one of 325 analyzed by Global Insight — reached its peak employment in the second quarter of 2007 with about 104,400 total non-farm jobs, said Luke Tilley, senior economist with IHS Global Insight, which is based in Lexington, Mass.

Only six metropolitan areas across the country are expected to regain their pre-recession employment levels by the end of the year, and not one is in California, according to the analysis.

The Santa Barbara-Santa Maria-Goleta area, for example, will not return to its pre-recession employment peak until the fourth quarter of 2012; Fresno will not see a return until the third quarter of 2012; Merced in the fourth quarter of that year and Modesto in the fourth quarter of 2014.

Tilley said the San Luis Obispo County community will see improvement faster because the recession was not felt as “deeply or severely” as in the Central Valley, Southern California and the Bay Area.

“Southern California (mostly Orange County) lost jobs directly because of the high concentration of subprime lenders, and the ports have slowed in the face of declining international consumer spending,’’ he said. Communities such as Riverside were overbuilt and are still hurting badly, he said.

State budget impact

But other economists said the Global Insight analysis may be overly optimistic given the uncertainty surrounding California’s fiscal crisis, a slow turnaround in consumer spending and the housing market decline, which caused many baby boomers to lose considerable wealth.

“Though the region has not felt the recession as much as those in the middle of the housing bubble, and some think that means the region will recover from what it has felt more rapidly, what is required for recovery is for consumers to spend at rates they were spending at before, and many economists don’t believe that they will,’’ said Nickelsburg with the UCLA Anderson Forecast.

He added: “And all bets could be off, depending on what cuts in government spending means for your region.”

In its first quarterly report of the year, the Anderson Forecast noted that California’s forecast “reflects a deeper and longer recession” than was previously thought.

Anderson economists predicted weak growth in the first two quarters of 2009 and very little growth in the third and fourth quarters of this year. The economy is expected to improve in 2010 and reach more normal levels in the beginning of 2011.

The state’s unemployment situation, though, is expected to worsen, with the unemployment rate rising to nearly 12 percent in the second quarter of 2010.

“Though the California economy will be growing in 2011, it will not be generating enough jobs to drive the unemployment rate below double digits until the following year,’’ Nickelsburg said.

San Luis Obispo County’s unemployment rate was 8.4 percent in May, compared to 5.1 percent the same month a year ago, according to the state’s Employment Development Department. In May, there were 3,400 fewer non-farm jobs in San Luis Obispo County than in the same month in 2008.

Bill Watkins, an economist with California Lutheran University in Thousand Oaks who has studied the county’s economy for years, agreed that the plethora of issues plaguing state and local government could mean protracted struggles for the area as a whole.

The data for the county in general, and San Luis Obispo in particular, shows that the area has been doing a lot better than the state, Watkins said. He attributes that to anchors such as Cal Poly, Pacific Gas and Electric Co. and the large government sector.

However, Watkins said those sectors are likely to be hit hard because of budget woes, and he predicted that the county will begin to see a larger impact on its employment levels over the next year.

“It’s probably optimistic to have it back where it was by then (2012),’’ he said. “I doubt the government’s problems will be gone by 2012.”

Global Insight’s Tilley agrees with the assertion that California’s budget cuts will “definitely hurt the area” as more than one-fifth of jobs here are tied to government.

Even so, he believes private, national companies will begin to invest more here, creating jobs, and consumer spending will make a comeback, especially among tourists who find the coast a desirable place to vacation.

“San Luis Obispo and other Central Coast metros are hurting, too, but they rebound more quickly in general,’’ he said.

Tony Pugh, consumer economics reporter for McClatchy Newspapers Washington, D.C., bureau, contributed to this story.