San Diego Economy Forecast to Further Slow in 2014
SAN DIEGO ECONOMIC LEDGER, February 2014, Vol 9, Issue 1
Kelly Cunningham, NATIONAL UNIVERSITY SYSTEM INSTITUTE FOR POLICY RESEARCH
Wednesday, February 5, 2014
Economic momentum in San Diego is projected to trail growth across the U.S. and California in 2014, according to the National University System Institute for Policy Research’s annual forecast. The slowing rate of growth is the result of higher taxes implemented nationally and statewide, cutbacks in military spending particularly significant to San Diego’s highly defense based economy, and further fallout of policy changes resulting from the Affordable Care Act.
According to Kelly Cunningham, primary author of the report, “The pace of economic expansion remains stubbornly sluggish and recovery continues to be uncertain and frustratingly slow.”
Following the acceleration of 24,500 jobs added in 2012, the number added in 2013 slightly softened to 23,100. In the fourth year of recovery, another 21,000 jobs are forecast to be added in 2014 as total San Diego payroll jobs at last approach the pre-recession high set in 2007.
San Diego’s unemployment rate continues to improve to the lowest levels of the past six years. Employment growth, however, is not keeping pace with working age population increases in the labor force. Much of the improvement in unemployment rate results from shrinking numbers looking for work as from jobs being added.
Population growth is dampened by a continuing net out-migration of residents. Meanwhile international migration rebounds and natural increase remains relatively steady. Consumer spending, as reflected in taxable sales, is forecast to improve while inflation modestly rises over the coming year.
Finally, housing prices are seen as flattening in 2014 as residential construction continues to slightly improve.
With the national and state situations as backdrop, the San Diego region is also seen as struggling to maintain growth seen in 2013, and further slowing to 1.8 percent is projected in 2014.
Four specific factors having the greatest impact on San Diego’s economic fortunes raised in the forecast include: Federal spending, innovation clusters, tourism, and real estate.
Overall, 2014 is not shaping up as a year of accelerating recovery but largely, and unfortunately, “more of the same.” Financial crisis take longer to recover from than other downturns. The United States has also given itself several self-inflicted wounds. And San Diego faces the same headwinds it often experiences during downturns of defense spending. The combination of these factors leads us to be pessimistic and cautious in our outlook for the upcoming year.
Falling into recession remains a persisting possibility in 2014 particularly dependent upon the Federal Reserve’s unwinding of stimulus and interest rate increases. The slow growing economy reflects the long slog the economy continues to face, continuing uncertainty and skittishness in the private sector and continued regulatory drags on growth emanating out of Washington.