San Diego Economic Momentum to Slow in 2013
Kelly Cunningham, NATIONAL UNIVERSITY SYSTEM INSTITUTE FOR POLICY RESEARCH
Friday, January 18, 2013
Although we anticipate the recovery will continue in 2013, the pace of improvement remains stubbornly sluggish. There is no reason to believe we will see an acceleration of growth as the national economy continues to drag. Indeed, as measured by GDP, we expect San Diego’s growth to slow in 2013 with California economic momentum lagging the rest of the nation.
In regard to San Diego employment, 21,000 payroll jobs are projected to be added in 2013, slightly more than the 18,000 added in 2012. In the fourth year of recovery, San Diego will only have replaced one-half of the jobs lost during the “Great Recession”.
Most local industries will continue seeing some job improvement, with notable exceptions in defense-based sectors. At least until greater certainty emerges in respect to federal spending, it seems imprudent to predict anything better than San Diego’s defense economy treading water in 2013.
San Diego’s gross domestic product (GDP), the most comprehensive measure of the local economy, reached an estimated $185.8 billion in 2012. Economic momentum is estimated to have slowed from 2.1 percent in 2011 to 1.7 percent in 2012. While San Diego slightly exceeded both California and U.S. economic gains in 2011, momentum faded somewhat in 2012 as San Diego matched U.S. expansion and slightly trailed California.
The 2013 outlook is for further slowing of San Diego’s GDP to 1.5 percent, slightly lagging California’s similarly tepid 1.6 percent growth. The forecast for the nation is somewhat better at 2.0 percent.
California fell deeper into recession five years ago than the rest of the nation. The state has subsequently also lagged in recovery. State budget shortfalls, unfriendly business regulations, high business and wage earner tax rates, and “out-of-control” healthcare costs continue to stifle more vigorous economic expansion. Increasing taxes in an attempt to accommodate budget gaps further drives wealth producers and business owners out of the state. Anticipated implementation of “cap and trade” for carbon dioxide emissions – essentially a massive tax and policy action that will generate even higher utility costs – adds yet another impetus for manufacturers, in particular, to head to friendlier states.
San Diego struggles under these same factors, only partially performing better in recent years because of the massive infusion of military and defense spending in the region. Some technology sectors have also managed, for the most part, to perform relatively better.
Despite this, migration away from San Diego has turned negative in recent years as well. Population growth in recent years only increased because of natural increase by some 26,000-27,000 annually added.
Details of the NUSIPR’s forecast for San Diego’s 2013 economy are published in the January 2013 edition of the San Diego Economic Ledger.