With taxable sales on the rise, growth in employment and a healthy tourism industry, San Luis Obispo County’s economy is leading the Central Coast’s economic recovery, according to the Central Coast Economic Forecast.
While economic growth here is not expected to be “robust,” the “wind of change is moving, but very slowly,” said Brad Kemp, director of regional research for Beacon Economics, the Southern California firm that presented Tuesday’s forecast.
“There are long-term challenges to overcome, but SLO is positioned well for recovery,” said Kemp, who urged the audience of about 500 local business, community and political leaders at the Alex Madonna Expo Center to put the recession behind them and look at some encouraging signs:
The county’s gross metropolitan product — the value of all goods and services produced in the county — has begun to flatten out — (down just 0.5 percent 2010 over 2009), he said.
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Taxable sales increased 21 percent from the recession’s trough to the third quarter of this year, and 16 percent from the second quarter of 2010 to the second quarter of this year. That compares to 12 percent and 10 percent respectively for neighboring Santa Barbara County, and 12 percent and 6 percent respectively for Monterey County.
San Luis Obispo County taxable sales are expected to grow 5.1 percent in 2012 and 5 percent the following year.
Hotel occupancy and average daily room rates have increased year-over- year (from September 2010 to September 2011), further evidence that the county continues to be an attractive vacation destination. Government is slowing the local job recovery because of budget cuts, which have resulted in public sector job losses. Even so, private sector jobs are on the rise, led largely by employment in agriculture, which includes the wine industry, and the tourism-related category of leisure and hospitality.
The county lost nearly 10 percent of its jobs from the peak of recession in June 2007 to the trough in August 2009. But it has gained 2.5 percent from the trough to September of this year, and 0.1 percent from September 2010 to September 2011.
Kemp said government jobs losses would end in the middle of next year and would begin to grow again at the beginning of 2013.
Beacon’s forecast calls for total non-farm employment to grow 2.5 percent in 2012 and 2.4 percent the following year.
Local housing scene
Median home prices in the county will remain flat over the next year, however, and inch up only slightly over the next two years, Beacon economists predicted. Home sales are forecast to grow 8.1 percent over the next year and 8.4 percent over a two-year period.
Kemp and Christopher Thornberg, founding principal of Beacon Economics, reminded the crowd that home prices before the bubble popped were unsustainable and that a key to the county’s economic success will be its ability to tackle the high costs of housing.
“Buying a house is not a bad idea, but it’s not the best investment available,” Kemp said.
In addition to working through the recovery in residential and commercial real estate, economists noted that other challenges remain.
Government will continue to downsize until it meets its new budget goals, and housing has excess capacity that must be absorbed before builders can begin construction again, Kemp said.
Both of those things will impact the growth of the county’s gross metropolitan product, he said. Other factors that weigh on the economy include a large retirement population worried about their financial security, and consumers who are already spending too much and not saving enough.
But both Kemp and Thornberg cautioned the audience not to be swayed by the talk of some pundits who have warned of a double-dip recession, even though there’s no data to support such claims.
“In sign after sign, we see an economy picking up speed,” Thornberg said.