The North County’s recovery from the economic recession won’t begin until 2011 at the earliest, according to a report by the UCSB Economic Forecast Project.
And that’s only because things can’t get much worse for the area, according to Bill Watkins, the project’s executive director.
“The North County is in its fourth year of recession, and the cumulative loss of economic activity is pretty significant,” Watkins said. “The only reason it won’t decline more is because it already has fallen so far.”
The report, released on April 23, gathered 2008 data on Santa Barbara County into January of this year. It states that the North County’s recovery, when it eventually does start, will be weak and tempered by both the fallout from the home foreclosure crisis and the state’s budget woes. California lost 236,572 homes to foreclosure in 2008 and, according to Watkins, Santa Maria was one of the first—and worst—places hit by the housing crush, despite the recent growth in its agricultural base.
“Ag is a source of job growth, but they’re low-paying jobs,” Watkins said. “It provides economic activity, but the jobs are low enough paying that it’s hard for people to find housing.”
Kirk Lesh, a real estate economist who contributed to the report, said Santa Maria and Lompoc accounted for about 84 percent of the foreclosures in Santa Barbara County.
“Effectively, the county’s foreclosure problem is a North County problem,” Lesh said in the report.
According to the report, median home values in the North County plummeted about 30 percent from a year ago, though home sales did increase 20 percent in the county from 2007, the largest gain in nearly 10 years.
Many of the houses purchased in the North County were bought as investment properties, the report said, and low prices should entice more buyers to the area in 2009.
Retail sales have taken a beating, not just in the county—where they’re down 4 percent—but statewide. They’ve declined 10 consecutive quarters in California, a trend that will continue through 2009, the report said.
According to Watkins, the closures of Gottschalk’s and Circuit City in Santa Maria are just the tip of the iceberg. This year, smaller retail stores, local car dealerships, and mom-and-pop stores will have a tough time staying in business, he said.
“Given the decline, I would expect a fair number of closures,” he explained.
According to the report, the unemployment rate in Santa Barbara County jumped to 5.4 percent in 2008, its highest level since 1996. Santa Barbara County lost 16,000 jobs in the fourth quarter of 2008 from the year before, with construction jobs taking the biggest hit.
The North County forecast for 2009 predicts the largest job declines in the service industry and government.
Overall, the summary concluded that Santa Barbara County’s economy will be less affected by the recession than San Luis Obispo or Ventura counties, because much of its workforce is in institutions largely unaffected by the economy’s performance.
“Santa Barbara County may see a growth spurt in the next few years,” the report said. “The growth will be associated with three institutions that, while they dramatically influence the county’s economy, are little impacted by the county’s economy.”
Watkins named Vandenberg Air Force Base, the Lompoc Federal Penitentiary, and Allan Hancock College as areas of economic stability for the North County, though community colleges will likely see a decline in 2009 due to state budget cuts, he said.
The Economic Forecast Project will soon release a specific report on the North County, which Watkins said is worse off economically than the South County. If there is a silver lining, according to the project’s director of economics, Dan Hamilton, since the North County began feeling the effects of recession in 2006 and not the second half of 2008 like the rest of United States, the area probably won’t be as bad off as the rest of the country during the next two years.
The U.S. economy isn’t expected to begin recovering until the second half of 2010, but California will lag behind, the report states.
In the report’s summary, Watkins said the state is performing far worse economically than the rest of the country and faces a multi-year recession.
“The state is cutting spending, increasing taxes, and increasing regulation during the worst economic decline since World War II. This is exactly counter to what is usually accepted as an economic development policy,” Watkins said in the report.
Watkins blames irresponsible policies for the deep recession the state will experience. He said cutting spending and increasing taxes is a prescription to slow growth that will result in a very weak economy for years—and perhaps decades.
“People are leaving California for other places, and we’re still losing jobs at a faster rate than the rest of the country,” Watkins said. “We’re not looking for an early recovery.”
Contact Staff Writer Jeremy Thomas at jthomas@santamariasun.com.
This article appears in Apr 30 – May 7, 2009.