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San Diego Used to Be Nearly Recession-Proof. What Happened?

One of the most frustrating phases of unemployment these days is waiting for the economy to show signs of recovery from a recession. It’s annoying because no individual or business really can do much about it, but wait it out.

Increasingly, there are signs that a three-year recession in San Diego is about to break for the better. Don’t expect miracles, but the preliminary signs all point to a better economy in a matter of months unless an unforeseen crisis surfaces.

The news comes from several fronts: The state Employment Development Department reports there are 11,400 more people working in San Diego County than a year ago. A Manpower Inc. survey of local businesses finds just 5 percent plan cutbacks in their employment ranks during the second quarter, less than half than did a year ago. Fifteen percent said they also planned to add staff.

The American Institute of Certified Public Accountants says 67 percent of its members surveyed expect to expand this year and 13 percent actively hiring.

The battered California housing market is showing signs of life. Foreclosure rates are dwindling, and deflated home prices are rebounding.

That adds up to good news for jobseekers because it represents an across-the-board consensus that the economy is showing signs of life. When that happens, employers again start expanding their payrolls and unemployment dips. Their optimism, however, doesn’t mean were going to see 4 percent unemployment anytime soon.

The economic reality is that the longer a recession has had a stranglehold on the economy, the longer the recovery period. In this case, we can expect a very slow but steady upward increase in hiring. More people working will create a stronger demand for goods and services and lead to more hiring.

The current recession is the worst in California in 50 years. Throughout the second-half of the last century, California’s bulging economy often shook off the most severe effects or recession. The powerful California economic engine — the state’s gross domestic product would rank the eighth largest among nations of the world if it were separated out — once shrugged at recession. The state was often the last region of the country to suffer from the recession and often was the first out.

In San Diego, the resilience was even more pronounced. San Diego County weathered recession better than most of the other counties in the state. Contributing to San Diego’s resilience was the fact that many aerospace and defense industry jobs were supported by government contracts. You can make the case that the government created an artificial labor market for aerospace workers. Those were some of the best and highest paying jobs in San Diego. And they were plentiful. In the early 1960s, General Dynamics employed 35,000 people in San Diego, or 15 percent of the private labor market.

But that had all changed by the time the downturn of the late '80s-early '90s hit. There was a national recession then, but it was especially notable in San Diego where the aerospace and defense industries had scaled back dramatically. The region was still wallowing in recession two or three years after other parts of the country were on the upswing.

During this current recession, the meltdown of the housing market was particularly crippling to the Golden State. The good news is the economic signs seem to be pointing the right way now for jobseekers. Does it mean that in the next six months California will replace all 1.4 million jobs that have been eliminated over past three years?

Absolutely not.

But it does mean that the economic engine is gaining power and that small monthly gains will likely trigger bigger gains in succeeding months?

Absolutely.

And, that’s how you climb out of a recession.

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One of the most frustrating phases of unemployment these days is waiting for the economy to show signs of recovery from a recession. It’s annoying because no individual or business really can do much about it, but wait it out.

Increasingly, there are signs that a three-year recession in San Diego is about to break for the better. Don’t expect miracles, but the preliminary signs all point to a better economy in a matter of months unless an unforeseen crisis surfaces.

The news comes from several fronts: The state Employment Development Department reports there are 11,400 more people working in San Diego County than a year ago. A Manpower Inc. survey of local businesses finds just 5 percent plan cutbacks in their employment ranks during the second quarter, less than half than did a year ago. Fifteen percent said they also planned to add staff.

The American Institute of Certified Public Accountants says 67 percent of its members surveyed expect to expand this year and 13 percent actively hiring.

The battered California housing market is showing signs of life. Foreclosure rates are dwindling, and deflated home prices are rebounding.

That adds up to good news for jobseekers because it represents an across-the-board consensus that the economy is showing signs of life. When that happens, employers again start expanding their payrolls and unemployment dips. Their optimism, however, doesn’t mean were going to see 4 percent unemployment anytime soon.

The economic reality is that the longer a recession has had a stranglehold on the economy, the longer the recovery period. In this case, we can expect a very slow but steady upward increase in hiring. More people working will create a stronger demand for goods and services and lead to more hiring.

The current recession is the worst in California in 50 years. Throughout the second-half of the last century, California’s bulging economy often shook off the most severe effects or recession. The powerful California economic engine — the state’s gross domestic product would rank the eighth largest among nations of the world if it were separated out — once shrugged at recession. The state was often the last region of the country to suffer from the recession and often was the first out.

In San Diego, the resilience was even more pronounced. San Diego County weathered recession better than most of the other counties in the state. Contributing to San Diego’s resilience was the fact that many aerospace and defense industry jobs were supported by government contracts. You can make the case that the government created an artificial labor market for aerospace workers. Those were some of the best and highest paying jobs in San Diego. And they were plentiful. In the early 1960s, General Dynamics employed 35,000 people in San Diego, or 15 percent of the private labor market.

But that had all changed by the time the downturn of the late '80s-early '90s hit. There was a national recession then, but it was especially notable in San Diego where the aerospace and defense industries had scaled back dramatically. The region was still wallowing in recession two or three years after other parts of the country were on the upswing.

During this current recession, the meltdown of the housing market was particularly crippling to the Golden State. The good news is the economic signs seem to be pointing the right way now for jobseekers. Does it mean that in the next six months California will replace all 1.4 million jobs that have been eliminated over past three years?

Absolutely not.

But it does mean that the economic engine is gaining power and that small monthly gains will likely trigger bigger gains in succeeding months?

Absolutely.

And, that’s how you climb out of a recession.

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Comments
5

Michael, What is currently the top employment sector in San Diego?

In the 90s cutback of defense contracts, the employees that were laid off still had great technical engineering and computer science educations and skills, and many could find good-paying replacement jobs locally.

Today, the age groups 20-40 seem largely to have soft skills: sales, PR, marketing, etc., plus building-related trades. These skills depend on a healthy economy. What will people in these employment categories do, other than work in the service trades?

April 7, 2011

San Diego Used to Be Nearly Recession-Proof. What Happened? Partly it's because the state government has done everything in its power to make CA as unappealing as possible to business. When businesses go under or move, they aren't being replaced. It's not coincidence that AZ, NV and UT have experienced business booms while CA's has floundered.

April 8, 2011

What types of businesses have left Cal for AZ, NV, and UT? Give me some data and numbers.

April 8, 2011

We were in Phoenix during spring training and based on what I read and heard while there, you are incorrect about a business boom in Az. In fact, it's quite the opposite. I read an interview with the CEO of Intel, in which he said if Intel were starting anew, Arizona wouldn't be in the running for its business and that Arizona would not be in the top 10 locales to make that kind of business investment. I don't know where the businesses from California are going, but thet sure as heck aren't going to Arizona.

April 8, 2011

I didn't think so...AZ and NV were both hit very hard by the housing fiasco, and in much of both states there isn't a high density of tech-savvy workers.

April 8, 2011

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