Let’s quit the caviling and cut to the chase: the U.S. is in a recession, and so is San Diego. On the last day of July, the U.S. revised its numbers and said the economy contracted in the final quarter of last year; employment has dropped for seven straight months, and average hours worked are down sharply. Economists are still arguing whether this is a national recession, but the final arbiter is the National Bureau of Economic Research, and its éminence grise and president emeritus, Harvard’s Martin Feldstein, says America has been in a recession since the end of 2007 and no end is in sight. It looks all but certain that the U.S. economy will meet the official recession definition of a significant decline in economic activity lasting more than a few months.

Ditto San Diego. Indeed, the local economy began sliding downhill shortly after the housing bubble popped in late 2005. Inflation-adjusted retail sales began declining in the second quarter of 2006, and the drop has been intensifying, says Kelly Cunningham of the San Diego Institute for Policy Research. “It’s a clear indication we are sliding into recession,” says Cunningham, because consumer spending is two-thirds to three-fourths of the local economy. As the real estate bubble expanded, people maintained their spending by borrowing money against the rising value of their homes. When housing prices started going south, the game ended. The new game is foreclosures. “It was a fragile way to build an economy. Clearly things have slowed down more than I anticipated.”

Alan Gin, economist at the University of San Diego, publishes monthly lead indicators of the local economy. They are designed to give an advanced look at where the San Diego economy is headed. They have been doing a good job. “They have been down 26 of the last 27 months,” says Gin. Like Cunningham, he earlier believed the economy was weak but that the county might narrowly avoid recession. But no more.

“For the first six months of 2008, average employment is down compared with the same period of 2007,” says Gin. “Given those numbers, you have to say that we are in a recession. We probably started on a mild path toward recession in June of 2007, when the unemployment rate started spiking up. You need two quarters of information to verify a trend.”

Cunningham points out that job growth has been below zero in three of the last four months.

The federal government’s $168 billion rebate program no doubt pumped up consumption for a while. Such gimmicks may stave off further contraction until the election, but in the long run they expand the federal deficit and take back the buoyancy they fleetingly provided. Inflation is already rising, despite housing deflation. Because of the credit crunch, it is going to be more difficult to get a loan.

In assessing the health of the San Diego economy, it’s generally best to watch employment trends. The data come out every month from the state’s Employment Development Department. Figures on household income usually come with a lag of about a year. Those data will probably show contraction, says Cunningham. There is also an estimate of annual economic growth for each major U.S. metropolitan area, published by a division of the Department of Commerce, but it’s two years behind.

So how long will San Diego’s pain last? “If we can see a little bit of growth by this time next year, we will be doing well,” says Cunningham.

Says Gin, “I see continued weakness through the end of this year and probably through the first half of 2009. There is no sign of a turnaround; the problems could continue beyond that.”

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Comments

Don Bauder Aug. 13, 2008 @ 12:46 p.m.

Response to post #1: Your points are well taken. Best, Don Bauder

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Anon92107 Aug. 13, 2008 @ 12:33 p.m.

Yup Don, “There is no sign of a turnaround; the problems could continue beyond that” indeed.

Let’s take a look at: THREE ROOT CAUSES AND CONSEQUENCES OF PROBLEMS IN THE AGE OF SAN DIEGO U-T BLOODSUCKERS

  1. CORRUPT COURTS are the most dangerous failure mode of any democracy, and as former Supreme Court Justice Sandra O’Connor documented, far too many judges have sold out their integrity and the Rule of Law to the Cashocracy. The current "sliding downhill" of the San Diego economy documented in this column is proof of this.

  2. EDUCATION SYSTEMS DESTROYED BY POLITICS were a grave concern predicted as far back as 1961 by President Eisenhower. The hideous consequence is the rapidly accelerating incarceration of poor people, greater than two million poor today or 1 out of every 100 American adults were incarcerated at the start of 2008. The solution to America’s poverty problem is putting as many of the poor in prisons as fast as corrupt courts can process them.

  3. EXPORTING AMERICAN OPPORTUNITIES caused by the total failure of leadership in all American institutions as most recently documented by Lee Iacocca. For example, GM prevented development of electric and fuel cell vehicles so they could maximize short-term truck and SUV profits, turning oil related problems into precipitous economic decline in San Diego and throughout America today where “There is no sign of a turnaround; the problems could continue beyond that.”

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Don Bauder Aug. 15, 2008 @ 6:22 a.m.

Response to post #5: Corporations' belief that their boards' only constituency is shareholders -- leaving out the public, employees, etc. -- is at the heart of the U.S. problem. Best, Don Bauder

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Anon92107 Aug. 14, 2008 @ 12:58 p.m.

Response to post #2: Thank you Don, this column must be gravely regarded.

A little historical perspective on why things are so bad and getting worse faster today. America’s greatness peaked out with the “giant leap for mankind” man on the moon in 1969. Johnson and Nixon began the decline and fall phase of American Democracy during the same time period by selling out America to the military-industrial complex that Ike had gravely feared could happen. Nixon also started the era of selling out American opportunities to the Communist Chinese. Then in 1987 the Space Shuttle Challenger disaster blew up not only astronauts but also our space program that hasn’t recovered since, which began our precipitous slide from being the premier world leader that The Greatest Generation had produced for America during and after WWII.

Avarice made American Capitalism a success during and after WWII, and today out of control avarice regardless of future consequences is destroying America with the continuous sellout of formerly American opportunities to China.

Of most immediate concern, the out of control avarice of the Bloodsucker Establishment sold America out during the oil crisis of 1973 by refusing to design and build hybrid, electric and fuel cell cars after it became clear that Mideast political instabilities would most certainly upset the balance of power around the world from then on, a failure in leadership that continued even after climate changes started causing rapidly increasing firestorms, glacial meltdowns, increasing worldwide poverty, starvation and terrorism.

And today we still have not started down the path of protecting our long-term future because the Bloodsucker Establishment puppeticians like Sanders and Bloodsucker controlled San Diego courts packed with puppetjudges that continuously overrule Aguirre and the best interests of We The People regardless of increasingly out of control economic and social instabilities in San Diego.

One more outrageous out of control consequence was reported on the U-T Front Page this morning documenting the need to spend at least $10 BILLION a year for California prisons because our education system is a total failure extending from preschool through our high schools and throughout our university system because of political destruction.

Thus we have entered the age of indenturement and incarceration and still NORC dominates our cultural values.

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Don Bauder Aug. 14, 2008 @ 3:03 p.m.

Response to post #3: The nation has become a finance center and is no longer a manufacturing center. We manufacture money and shuffle it around, redistributing it in an inequitable and economically unwise way: the upper 1 percent has more than 40 percent of the financial assets. The economy is more than 70 percent consumer spending but the debt-laden consumers don't have the wherewithal to keep spending, and the superrich couldn't possibly spend all they rake in. At some point, we won't have merely a recession: the downturn will be deeper and last longer. Best, Don Bauder

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Anon92107 Aug. 15, 2008 @ 2:42 a.m.

Response to post #4:

"At some point, we won't have merely a recession: the downturn will be deeper and last longer." Or as the old metaphor goes “I don't think we are in Kansas anymore,” I sure hope you warn us before we go off the cliff Don because “longer” is here.

The fact is that it no longer takes some overrated, typically erroneous economic computer model to tell us that we are in a lot of trouble this time at all, especially when the “assumptions” of the 20th century no longer apply in the 21st century.

The new variables must take into account the reality that China has imported our jobs while we have imported the Chinese form of Bloodsucker government. Not exactly a quid pro quo, more like a lose-lose scenario of our failures to take the responsibilities of democracy seriously when the avaricious capitalists on Main Street and Wall Street turned into terrorists.

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Anon92107 Aug. 15, 2008 @ 11:07 a.m.

Response to post #6:

Actually even some of the shareholders seem to be forgotten all too often when the boards are packed with fellow bloodsuckers.

It seems like we have a new saying, live by the capitalism, die by the capitalism.

Who would have predicted that Wall Street would betray the U.S.A., risking our economic and social destruction by selling out American Democracy to Communist Democracy merely for the sake of maximizing avarice?

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Don Bauder Aug. 15, 2008 @ 12:25 p.m.

Response to post #7: The inbreeding of corporate boards is a definite problem. Best, Don Bauder

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anongranny Aug. 19, 2008 @ 11:09 a.m.

Question: Wasn't there a Supreme Court ruling that corporate boards MUST consider the stockholder's interests above all other interests?

As for the destruction of our economy, think about our former government officials who have 'advised' the Carlyle Corporation, which has major investments in Asia.

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Don Bauder Aug. 19, 2008 @ 12:39 p.m.

Response to post #9: I think you are referring to a court decision in Delaware, where almost 50 percent of companies are incorporated. Takeover sharks cite that decision to force their prey to capitulate. I may be wrong, but I don't think the Supreme Court has made the kind of ruling you cite. In any case, putting stockholders' interests in front of other interests is not quite the same as considering shareholders a board's ONLY constituency, which is what I was talking about. Best, Don Bauder

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a2zresource Aug. 23, 2008 @ 8 p.m.

Regarding #10:

It should be recognized that the stockholders have an interest in an invested firm's continuing ability to access the markets, to do business, and to make a profit that increases the value of issued shares.

Whenever a firm makes unethical decisions to do things "on the cheap" to avoid the cost of regulatory compliance -- and the stockholders don't care to make any noise about it -- then both firm and stockholders have assumed the risks that come along with any benefits of doing things "on the cheap."

When I use the word "unethical", I mean some conduct that isn't minimally ethical because it violates the laws that ordinary reasonable people (the same kind that should be getting picked for jury duty) understand and obey as part of their non-feloneous lives as free American citizens.

The bottom line is that when a firm uses up all of its good will by making stupid decisions and causing harm, then the ones who end up losers are the holders of equity investment in that firm because the firm loses access to markets, is less able to do business, and is not operating optimally to generate consistent profits for investors.

How much good will do most inbred-board corporations have left?

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Don Bauder Aug. 23, 2008 @ 9:25 p.m.

Response to post #11: Your interesting points bring up a discussion I have had with a good friend of mine. We both have opposed the deals by the Chargers and Padres that are fleecing the City. But my friend says that the Chargers and Padres shouldn't be blamed. They are out to maximize profits, and completely outlawyered the City under the hapless Casey Gwinn. I argue that corporations have an obligation to serve the public and play fair with taxpayers. They make plenty of money in our capitalist society, and owe something to their communities. Best, Don Bauder

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