U.S. Department of Defense spending was responsible for slightly less than one quarter of San Diego’s economy during 2023, according to a study put together with federal data.
The Pentagon increased its direct spending in San Diego to $36.1 billion in the fiscal year that ended on Sept. 30. The amount grew four-tenths of a percent over fiscal 2022.
The number of Defense Department jobs in San Diego County fell to 148,704, from 151,342.
The tally showed just how sizable the military’s footprint is. It took into account the region’s sprawling Navy and Marine Corps bases; defense contractors large and small; and early career military personnel starting families. Not to be forgotten are the 26,000-plus civilian employees of the services.
Yesterday’s officers and enlisted personnel – some 41,000 of them – are spending their retirement years in San Diego County and drawing pensions. By themselves they created a $1.5 billion economic impact.
MBA students from the Rady School of Management at UC San Diego assembled the study. SDMAC, also known as the San Diego Military Advisory Council, coordinated the effort, which was funded by local businesses. Bank of America was the study’s title sponsor.
Multiplier Effect
Report authors say defense spending was responsible for $56.4 billion in gross regional product, or 23.6% of the San Diego economy. They calculated that the $36.1 billion in direct spending generated a multiplier effect of $20.3 billion, resulting in a total economic impact of $56.4 billion.
Contracts and procurement amounted to $19.0 billion in fiscal 2023, funding nearly 206,000 civilian jobs. The dollar amount declined 1.5% from the fiscal 2022, which was the post-COVID peak. Over the last four years, spending increased 17.6%.
Privately held General Atomics got the largest share of funds obligated, with 18.6%, followed by General Dynamics (NYSE: GD) with 15.7%. General Dynamics builds ships on the San Diego waterfront at NASSCO and also runs an information technology business. Third place went to Northrop Grumman Corp. (NYSE: NOC) with 9.4% of funds obligated. BAE Systems and Booz Allen Hamilton (NYSE: BAH) rounded out the top five.
A minor source of economic impact was defense spending via government purchase cards. Some $166 million was charged on such cards in fiscal 2023, down 37.8% from $267 million in the prior year.
Some 68 Navy ships and submarines are stationed in San Diego during fiscal 2024 (which began Oct. 1). Naval Air Station North Island supports three aircraft carriers. San Diego Bay is home to 17 Arleigh Burke class destroyers and two of the futuristic Zumwalt class destroyers. The number of submarines will grow this year from four to five.
San Diego is home to one out of every six sailors in the Navy (with 59,670 people on active duty locally). It is home to numerous operational and administrative commands, including Naval Special Warfare Command (overseeing and training SEALS on Coronado’s Silver Strand), Naval Air Forces (at North Island) and NAVWAR, the Naval Information Warfare Systems Command, specializing in military IT, networking and cybersecurity.
The county is home to 46,453 active duty Marines and 823 members of the U.S. Coast Guard.
Riding out COVID Crisis
“This past year marks a return to normal for the San Diego regional economy, as it does for most of the United States,” report authors stated. “Earlier in this cycle, we noted that defense spending tends to rise during periods of distress. Our compilation of military economic activity in the region from 2019 to the present clearly illustrates this arc, quantifying the stability provided by long-term defense infrastructure and operations commitments along with the boost provided by rapid response emergency commitments. Together, these two drivers preserve and fuel the economic engine of resilience, which has propelled San Diego into a smoother and more predictable recovery than much of the U.S.”
The report continued: “As we look ahead to more normal economic times, we stand to benefit from another aspect of our regional military activities, that federal commitments tend to be indexed to inflation. With military pay rising by 4.6% in 2023 and 5.2% in 2024, defense dollars are already poised to buffer the effects of our nation’s economic uncertainties and will continue to invest in the long-term drivers of regional prosperity like our innovation economy.”
