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San Diego the next recession engine?

Federal data show startling downward revisions

San Diego's economy is flatlining below the state average
San Diego's economy is flatlining below the state average

"San Diego may once again be leading the rest of the state and nation into recession, as we did ten years ago," says Kelly Cunnngham, economist at National University System.

The federal Bureau of Economic Analysis has released its annual update of gross domestic product in the nation's metropolitan areas. The bureau reduced its previous estimate of San Diego's 2016 economic growth from a bit over 2 percent to almost zero.

"The slowdown of the economy since 2013 has been much worse than formerly realized," says Cunningham. Also, the revisions show that the late 2007/early 2009 Great Recession hit San Diego harder than previously realized.

Since 2013, San Diego has been significantly lagging the state and nation in economic and employment growth, says Cunninngham, and "San Diego job growth is slowing considerably so far in 2017.

Cunningham had estimated the local economy would only grow at 0.2 percent this year, but with this year's job growth lagging 2015 and 2016, the economist thinks his estimate perhaps should be even lower — "maybe sinking negative into recession?"

"I attribute San Diego's sputtering economy in large part to the downsizing of the military," says Cunningham. "Military employment in San Diego peaked in 2009 at 112,000. As of 2015 (the latest numbers available), the number is 98,828 active-duty military personnel based here. Also, the unreasonably high cost of housing may be driving people away."

Cunningham also thinks the high minimum wage "may be causing small business to go away."

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San Diego's economy is flatlining below the state average
San Diego's economy is flatlining below the state average

"San Diego may once again be leading the rest of the state and nation into recession, as we did ten years ago," says Kelly Cunnngham, economist at National University System.

The federal Bureau of Economic Analysis has released its annual update of gross domestic product in the nation's metropolitan areas. The bureau reduced its previous estimate of San Diego's 2016 economic growth from a bit over 2 percent to almost zero.

"The slowdown of the economy since 2013 has been much worse than formerly realized," says Cunningham. Also, the revisions show that the late 2007/early 2009 Great Recession hit San Diego harder than previously realized.

Since 2013, San Diego has been significantly lagging the state and nation in economic and employment growth, says Cunninngham, and "San Diego job growth is slowing considerably so far in 2017.

Cunningham had estimated the local economy would only grow at 0.2 percent this year, but with this year's job growth lagging 2015 and 2016, the economist thinks his estimate perhaps should be even lower — "maybe sinking negative into recession?"

"I attribute San Diego's sputtering economy in large part to the downsizing of the military," says Cunningham. "Military employment in San Diego peaked in 2009 at 112,000. As of 2015 (the latest numbers available), the number is 98,828 active-duty military personnel based here. Also, the unreasonably high cost of housing may be driving people away."

Cunningham also thinks the high minimum wage "may be causing small business to go away."

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Comments
8

Cunningham, like many so called economists, never see the recession coming until long after it has started. He also decries any increase in the minimum wage. Like most college educated elite he does not value the work that non-college graduates do. Employers who pay less than a living wage and who provide no/low benefits should be charged a poverty tax. Minimum wage should be a starting wage for those who are first entering the job market not the ceiling that many employers use it as. Low wage employers are investing in future poverty.

Sept. 28, 2017

AlexClarke: Au contraire. This observation by Cunningham is the only one I have seen, and I believe I can say without fear of contradiction that no other economist in San Diego has come even close. The rest are singing happy tunes. Cunningham is beating everybody. For the last ten years he has rocked the San Diego establishment by pointing out the local economy's weaknesses. The Reader has been proud to print his predictions, which have been right on the money.

You are right that economists generally don't see a recession until it has started. But that is not true of Cunningham. He consistently gets there first. Best, Don Bauder

Sept. 28, 2017

I stand corrected. While he my be ahead of the rest of them he is still among those who do not value work by anyone but the college educated elite.

Sept. 28, 2017

AlexClarke: I am quite sure that Cunningham has a PhD in economics. This is a recondite subject; economists must master the most advance mathematics, as well as understand concepts in such areas as sociology, statistics, etc. Best, Don Bauder

Sept. 28, 2017

What has Dr. Cunningham have to say about the now proposed changes to the tax code? Personally I believe California residents will be hurt due to the high tax rates within our state. While businesses will do better. Call me a skeptic but I see higher tax burdens for Californians.

Sept. 28, 2017

JustWondering: I haven't really studied the proposal (there isn't much to study) but I will note that this afternoon I turned on the TV and Trump's alleged economist was saying that the farm bureau was the biggest backer of the elimination of the inheritance tax. That is a lie. The biggest backers have always been Walton family members and other multi-billionaires.

Through several administrations, we have been told that the the tax cut is for the middle class. It never has been. It has always been for corporations and the superrich. DON'T LISTEN TO A WORD THAT TRUMP'S AIDES SAY ABOUT THIS TAX PROPOSAL. BEST, DON BAUDER

Sept. 28, 2017

Corporations are money magnets. Retailers, manufacturers, software & entertainment makers all distribute their wares widely. Much of the money they earn returns to corporation headquarters.

We have no major corporate headquarters in SD (OK, Qualcomm). Instead we buy from them and send our money to Los Angeles, Seattle, Detroit, Silicon Valley and far flung ports around the world.

So, with no local money magnet and all our purchases supporting those other cities, is it any wonder that our economy sucks?

Sept. 28, 2017

swell: We do have corporate headquarters in biotech. San Diego is one of the three major biotech centers in the U.S. Some of the San Diego-nurtured biotech's have done extremely well.

However, I must again express a caution. Many of the biotechs get their original ideas financed with government money, such as grants.Then a group of executives and financiers take the company public. When it finally goes public, the original insiders and first and second tier investors have invested very little -- often pennies per share -- in the company. They will make out even if the company fails. If a stock falls to 50 cents you still have a fat profit if you only paid 5 cents a share for your stock. Normally, the companies that haven't succeeded are bought out by another company that hopes to rescue something with the ideas and assets. The insiders still make out. The people who bought the stock at $10 or $50 are wiped out. Often they are school teachers who thought they were investing in something that would rescue humanity. Best, Don Bauder

Sept. 28, 2017

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