Poised before projections of PowerPoint slides packed with graphs and figures, UC Santa Barbara economics professor Peter Rupert painted a picture of jobs in Northern Santa Barbara County as dim as the room he was lecturing in.
The scene of Rupert’s presentation, the Fountain Pavilion at the Santa Maria Fairpark, was once lined with monitors for betting on horse races. But that enterprise shuttered for financial reasons, a fitting backdrop for a frank discussion of an economy sauntering, not galloping, back to health.
“We are recovering, but really slowly,” Rupert explained to the dozens of local business leaders present. “And really, really slowly in the labor market. The labor market is still not moving much at all.”
While Rupert, chair of UCSB’s Economics Department and head of the school’s Economic Forecast Project, remains optimistic, the data doesn’t lie. The recovery isn’t happening as fast as it has after previous recessions, the county’s Gross Domestic Product has flat-lined, and consumer confidence is lower than ever. While the North County is no longer hemorrhaging jobs, firms simply aren’t hiring.
Most concerning, Rupert explains, is the average time of unemployment, now up to 40 weeks per person. A growing number of jobless people have been out of work for more than a year, Rupert said, meaning they’re likely becoming unhireable.
Though Santa Barbara County falls in line with the state unemployment numbers—8.7 percent at the end of 2011—Rupert doesn’t put much faith in the data, as it doesn’t take into account those who’ve given up looking for work. He looks instead to the ratio of employment-to-population, which isn’t coming back.
“For some reason, and I don’t know what that is, there’s more of a mismatch in the labor market than there’s ever been,” Rupert said. “Firms are not ready to hire yet. Even though they have vacancies, they’re not closing the deal.”
All the signs, Rupert said, point to little job creation in the North County. But how bad is it really?
Are we falling behind?
One clue to just how slowly Santa Barbara County is recovering its recessionary job losses when compared to the rest of the nation might be found in a recent report by the firm IHS Global Insight, prepared for the U.S. Conference of Mayors in January.
According to the report, excluding farm labor, the Santa Barbara-Santa Maria-Goleta metropolitan statistical area (MSA) is one of the slowest recovering job markets in the entire country.
As of the first quarter of 2012, the firm says the area will have lost 14,000 non-farm jobs—or 8 percent—from its pre-recession peak of 174,300 jobs. Just 200 of those positions could be recovered by the fourth quarter of 2012, the report projects. That number reflects a miniscule 1.9 percent recovery, ranking the Santa Barbara-Santa Maria area third from the bottom out of 363 metro areas nationwide, behind only Carson City and Reno, Nevada.
Charles Dougherty, an economist who helped prepare the report, explained that the recession had varying effects on employment across the country. Some places were hardly hit at all and quickly regained their job losses. Santa Barbara County, however, “is on the opposite end of the spectrum,” having experienced consistent payroll cuts since 2008 and currently struggling to join the rest of the country in recovery.
“While the nation began to see payroll gains again in early 2010, employment in Santa Barbara-Santa Maria continued to contract through much of 2011, with continued losses in the trade and transportation and the government sectors,” Dougherty wrote in an e-mail to the Sun. “We forecast continued contraction in this metro until the second quarter of 2012.”
The report, Dougherty said, analyzed historical data from the U.S. Bureau of Labor Statistics to the third quarter of 2011, and forecasts employment to the fourth quarter of this year using econometric models.
Emerson Figueroa, a regional analyst for the state’s Employment Development Department, blamed the apparent sluggish growth on local job losses in government, the region’s top employment sector with 36,000 total positions.
“Over the past year, we’ve lost 1,800 [government] jobs and 700 from November to December of 2011,” he said. “Being the biggest sector and knowing that government is trying to reduce spending, we’ve seen it in the local government. They don’t have as much revenue as they used to have. With less money, they have to not hire as many people as before.”
Taking issue with the report’s exclusion of agriculture, the county’s sixth largest industry, Figueroa said the news isn’t all bad. In fact, with the exception of government, things are relatively stable. Farm labor is up slightly, and total private jobs have increased by 5,100 since they hit rock bottom in January 2010. Professional business services have seen a “considerable increase” of more than 3,000 jobs from 2010, and education and health services have continuously grown since the start of the decade, up to 21,600 total jobs at the end of 2011.
“Construction lost a lot of jobs, but right now, it seems it has recovered its normal rhythm, but at a lower level,” Figueroa said. “It’s the same for financial activities. For the most part, it’s been stable six months in a row.”
Prior to the recession, home building and retail were booming countywide. When the economy started to tank, banks got gun-shy and development came to a grinding halt. As a result, according to Figueroa, retail trade, the region’s second largest employment sector, declined by about 4,000 jobs, and huge losses were seen in manufacturing and construction.
Manufacturing jobs will likely never return to pre-recession levels, UCSB’s Rupert said, and finance, insurance, and real estate haven’t returned yet. New home construction is at a standstill as well. According to the Home Builders’ Association of the Central Coast, only 347 new residential building permits were issued in Santa Barbara County in 2011, the second fewest since 1990.
A few industry sectors are on the rise in the county after declines, including retail, health care, and hospitality. The EDD projects steady overall job growth for the North County to 2018, however, Rupert said, there is a downside. Much of the projected growth over the next six years will occur in low-paying jobs—like agriculture, retail sales, and service: waiters and waitresses.
“Part one is that the job growth really isn’t coming back very fast,” Rupert told the Sun. “Part two is the job growth that we will see, 50 percent of those are less-than-$40,000-a-year jobs, or even $20,000 a year. That’s the other big issue. Are we going to see some job growth? Yes. But is that going to have large impacts?”
Plan of attack
With the slow pace of recovery, several North County cities are taking a proactive approach to increasing employment. In Lompoc, which has the county’s highest unemployment rate at 16.5 percent, city council members are discussing offering incentives to local contractors to encourage construction jobs. In Solvang, which has the lowest jobless rate in the county, the city’s economic development committee is working on an “action plan” to draw wealthier tourists and industries with the ability to create higher-paying jobs for residents.
Dave Cross, director of Santa Maria’s Economic Development Commission, said the city is taking a two-pronged approach to job creation. Commission members are pursuing companies interested in moving to Santa Maria and focusing on retention programs to help existing businesses hire more people and increase sales.
“The economy hasn’t been right for them to pull the trigger yet, but we’ve stayed on their radar screen,” Cross said. “What we’re hoping for in 2012 is that things turn around to the point where they take a serious look at Santa Maria, and when they come here they start hiring people.”
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The city, historically the retail hub of the Central Coast, is also making inroads in bringing retail to the Crossroads Shopping Center and is welcoming David’s Bridal to the Target Center. Cross also sees potential in the Santa Maria Airport, where the business park creates the potential for thousands of light industrial jobs. The recently extended runway also puts the city in the running for Allegiant Air flights to Hawaii, which could provide a boost to tourism and other benefits.
There are other local success stories. Such Santa Maria-based companies as aerospace manufacturer C&D Zodiac; natural gas supplier Mafi-Trench; and Hardy Diagnostics, which makes medical-testing supplies, have all seen expansion during the recession by marketing internationally.
Much of the city’s current efforts are entrenched in bringing in more manufacturing and industrial business, Cross said, and doing whatever it takes to move construction projects along.
The biggest barrier to construction, Cross explained, is financing. To help matters, the EDC is putting businesses in contact with the Small Business Administration and other organizations providing low-interest loans. As banks begin to loosen their restrictions, Cross said, the result could be a “snowball effect” on economic development.
“If you take Santa Maria, there’s a whole list of projects that have been approved by the Planning Commission,” Cross said. “They just need those building permits. If those projects could just get financing, there would literally be a construction boom.”
Looking not to replace, but to work in concert with city economic development agencies, is the Economic Alliance of Northern Santa Barbara County (EconNSBC). The private group, started by former Santa Maria Planning Commission member Lawnae Hunter, is currently holding workshops in cities throughout the North County, presenting its “1,000 Day Road Map” to economic recovery.
It’s a long-range strategic plan designed to market the North County as a region, to encourage existing companies to grow, to increase entrepreneurship, and to identify the industries with the greatest potential to attract new businesses to the area.
The group’s main focus, according to its co-chairman Ray Deutsch, is on creating high-paying jobs in areas such as high-tech manufacturing, architecture, and wine tourism, which will in turn stimulate more entry-level employment down the line.
“We are all about jobs. That’s the primary reason we’re doing this,” Deutsch said. “We are really lopsided right now in our community. We’ve lost a lot of industrial jobs over the last 15 to 20 years, and haven’t really concentrated on getting those back.”
Is there a silver lining?
To help quicken the comeback, Deutsch and EconNSBC see “low-hanging fruit” in the oil and gas industry, as oil companies continue to express interest in expanding drilling operations into the Monterey Shale formation of the Santa Maria Basin, literally right under the city’s nose.
“[Oil] has the highest paying jobs of any industry in our region,” Deutsch said. “It’s been here for over 100 years. We’ve been pumping oil out of this ground continuously, and most people don’t even know it.”
County supervisors recently declined to add an oil extraction tax to the upcoming ballot, which could’ve taken wells out of commission, but regulatory barriers still remain. An architect by trade, Deutsch said state and local building and development regulations have also impeded job creation and must be balanced with the county’s economic needs.
“We’ve got to find ways of being able to do the things we need to do as far as protecting the quality of life. That’s paramount, but let’s make sure we still have a quality of life to protect,” Deutsch said. “Right now, people are really struggling with just staying above water.”
According to Deutsch, the airport’s nearly complete runway extension could allow for marketing locally manufactured goods and produce internationally to places like China and Japan. Additionally, EconNSBC has also been in discussions with California Lutheran University, which recently opened a graduate program in Orcutt, to bring a brick-and mortar campus to Santa Maria.
While Deutsch cautions that the turnaround won’t come right away, he hopes for a shift toward the creation of higher-paying jobs over the course of the three-year project.
“The silver lining is that we are all going to have to work together on this,” Deutsche said. “You have to market yourself as a region, you have to identify your strengths and build upon them, and make sure what you have in place are the things that are going to allow industry and businesses to be profitable to exist and grow. This is what creates jobs.”
Rupert, too, sees potential for higher-paying jobs in the North County. Education and health care are on the upswing with the opening of the Lompoc Valley Medical Center and the new Marian Medical Center, and oil company Santa Maria Pacific is considering expanding its workforce several fold, he said.
Rupert said cities should be figuring out incentives to encourage existing businesses to expand and get firms to hire local labor. A total recovery, however, will require more than subsidies. Economic development plans should include clear goals of city size, incorporating green space and parks to entice people—and, in turn, businesses—to relocate to the area.
Though the recovery will continue slowly, Rupert said, all the seeds exist for a rebound to happen at least as quickly as in previous recessions, due to massive cash reserves and liquidity in the financial system. If the region can get oil going and businesses moving in, more high-paying jobs will come.
“I’m optimistic,” Rupert said. “We see these recessions and recoveries all the time and we’ll come back. People just want it to come back faster than is going on now.”
Staff Writer Jeremy Thomas can be contacted at jthomas@santamariasun.com.
This article appears in Mar 1-8, 2012.