The San Luis Obispo County economy is expected to continue to grow, but at a slower pace, with high cost of housing and lower wages relative to other areas of California presenting major challenges, according to economists who presented at the 2018-2019 Central Coast Economic Forecast.
The event, held Friday at the Madonna Inn, detailed growth over the past couple of years and the projected future of the local, state and national economy.
“Every year, it seems people are predicting the economic crash is a couple of years away,” said Chris Thornberg, founding principal of Beacon Economics. “The reality is we just don’t know. You can’t assess the when very easily, but you can look at the why and what may cause a crash.”
Some of the data showed job growth over the past year, such as 600 new jobs countywide in education and health care, and 600 new jobs in leisure and hospitality, according to a 43-page report compiled by Beacon Economics.
Tourism also was up over the past year, with a record number of travelers coming through San Luis Obispo County Regional Airport, and traffic could continue to increase, considering traffic through August was up 21.2 percent over the same period in 2017.
From 2016 to 2017, wages in San Luis Obispo County grew an average of 3.3 percent, to $45,796, trailing the 4.6 percent growth in the state overall, the report detailed.
“Average annual wages increased across most industries in San Luis Obispo County in 2017,” the data showed. “More importantly, with a historically low unemployment rate and a shortage of workers, there should be upward pressure on wages over the coming year.”
The county’s unemployment rate is 2.8 percent, compared to the state’s 4.1 percent, the report noted.
Thornberg, who’s based in Los Angeles, said Australia has experienced steady economic growth since 1991, and it’s possible for the U.S. economy to keep trending upward.
But Thornberg also said troubling trends are on the horizon, mainly the high number of retirees and increasing costs of Medicare and Social Security.
Locally, high housing costs, challenges with wage competition compared with other California regions, along with slowing job growth, are trends, according to Beacon’s research.
“Despite a gradual slowing of overall growth in the San Luis Obispo County economy, the labor market continued to expand in 2018,” the report stated. “... Overall local spending activity slowed in 2018, mainly because of a decline in business and industry spending. A surge in building and construction, however, partially offset the contraction.”
Beacon forecasts little change in the upward trend of home prices (topping $600,000 in the county) over the next year because of limited construction activity.
“Absent any significant policy changes, we expect sales activity to remain between 3,200 and 3,600 in the near term and price appreciation to advance at a slower rate of 5 percent to 6 percent,” the report noted.
Thornberg’s recommendation to combat the housing affordability crisis is to build more homes on a significant scale to increase the housing stock.
Local cities — particularly San Luis Obispo, which employs 54,132 (more than twice as many as the next highest city of Paso Robles at 18,449) — have faced fierce community debate about significant housing expansion and its impacts on infrastructure and quality of life.
“Although the labor market in San Luis Obispo County will continue to grow, the region faces challenges going forward,” the report states. “Low affordability of housing, from rental units for workers to homes that cater to middle- and upper-middle-income households, remains an ever-present issue.”