Kelly Cunningham, NATIONAL UNIVERSITY SYSTEM INSTITUTE FOR POLICY RESEARCH
Wednesday, January 20, 2016
This tepid growth translates into a forecast for 34,000 payroll jobs to be added in the region, while annual unemployment approaches full employment of 4.8 percent. This improvement in unemployment should be understood as a function of both increasing job opportunities, but also lower labor participation rates.
“Going forward San Diego is likely to continue to slightly trail all of California and essentially match the rest of the nation,” says Cunningham. “In our forecast for San Diego, the region excels in some sectors, such as high-value R&D technology businesses, but lags in other areas of real estate and business services. Military spending cutbacks have also slowed the region’s economic outlook.”
The forecast of San Diego’s economy is driven in part by the uncertainty of national global economies. Multiple indicators suggest the U.S. economy will not shake off the lethargy of the past six years, and indeed likely to further slow in 2016. Although NUSIPR does not necessarily foresee negative growth or recession nationally (just yet), Americans will continue to experience sluggish economic conditions. In addition, at this point of six going on seven years of a post-recession timeline, economic cycles tend to slow, not accelerate.
A logical outgrowth of the tepid job market is wage growth has been extremely lean. Since the recession ended, average hourly earnings increased at the lowest rate since the 1960s as wages barely outpace “official” measures for low inflation. Although slowly improving, median household income in San Diego, after adjusting for inflation, will have still not recovered levels reached prior to the recession.
San Diego also continues to face two-tiered levels of job growth. The recession and recovery continued a decades-long squeeze on middle wage jobs in San Diego. In 2001 middle wage jobs accounted for 56.6 percent of all payroll jobs in the County. The proportion shrunk to 52.6 percent before the recession hit, and in the subsequent recovery the ratio still continued to fall to 49.5 percent as of 2014.
At the same time as demand for higher skilled and highly compensated positions continues to grow, lower wage jobs not easily replaced by machines or technology also increases. The result has been San Diego’s economy becomes ever more hour-glassed shaped as more jobs accumulate on the top and bottom, and fewer in the middle. This has significant implications for San Diego’s housing, income, education, and business needs beyond 2016.
Key sources of San Diego’s economic strength, principally derived from technology driven research and development as well as specialized manufacturing, should help the region perform slightly better than the rest of the nation. But given our continuing dependence upon tightening military and defense budgets, slowly improving tourism and local area consumption spending, and turmoil of real estate and financial markets, San Diego will be fortunate to achieve a seventh continuous year of positive economic momentum in 2016.
The National University System Institute for Policy Research forecast of San Diego’s 2016 economy was presented on January 20, 2016 at National University’s School of Business and Management Speaker Series. A recording of the event is available at https://nu.zoom.us/recording/play/3oaPAavejwWB26XnamBiXItXoPJacl-55i5ORysdyfsMttHtsY6M8Ox6lzD4gQW8