5 p.m., May 25
Cunningham Says Local Economic Recovery Losing Momentum
Kelly Cunningham, economist for the National University System Institute for Policy Research, says in his July "Economic Ledger" that the San Diego economy may go through "another painful adjustment and retrenchment," although he doesn't necessarily see a double-dip, or return to recession. In a comprehensive report, Cunningham notes that in the last quarter of 2008 and the first two quarters of 2009, taxable retail sales dropped at annual rates between 15.4% and 18.8%. He believes they dropped 13% last year. He projects only a 0.8% inflation-adjusted rise this year and 1.5% next year. On a per capita basis, sales will drop this year and barely rise in 2011. Population will grow just 1% this year and 0.9% next year, he forecasts. In recent years, more people have been moving out of the county than moving in.
He has an excellent analysis of employment trends. Jobs in construction, retail, manufacturing, finance, and real estate services "are not likely to return any time soon," warns Cunningham. The defense industry, a long-time San Diego stalwart, is vulnerable "as the federal government brings down the deficit." But there are positive signs: business services jobs have been rising since late last year, and consumer confidence and help-wanted advertising are trending up.
After soaring inordinately, then dropping more than 40%, housing values have been rising impressively for 12 consecutive months. But Cunningham doesn't see this pace of increase continuing. Statistically, housing construction may appear to bounce back sturdily, but the "numbers will remain at recessionary levels."
"Financial crises tend to produce weak recoveries," says Cunningham. He pointed out previously that San Diego's economy is extremely real estate-intensive. In fact, only the economies of Orlando and Miami are more dependent on real estate. That is sobering.