The national and local economies should rise in 2011, but the growth likely won’t be robust, and hardly enough to significantly reduce the region’s high unemployment rate, according to a group of experts at a recent economic round-table event.
“We’re still not out of the woods,” said Alan Gin, an associate professor of economics at the University of San Diego. “We got into this really quickly, and unfortunately it will take us a lot of time to get out of it.”
Gin, who assembles data to produce a monthly index for the local economy, shared the most recent report at the 27th annual San Diego County Economic Roundtable held Jan. 28 at the Joan B. Kroc Institute for Peace and Justice at USD.
The Index of Leading Economic Indicators for San Diego County showed the biggest gain in 12 months at 0.4 percent in December. It also marked the 21st consecutive month that the index either rose or stayed flat, usually meaning better days are ahead.
The anticipated economic increase should create a net gain of 10,000 to 15,000 jobs this year, above the estimated net increase of 6,300 jobs in 2010, Gin said.
“It’s positive growth, but relatively weak by San Diego standards,” he said, noting that in some of the boom years of the late 1980s and 1990s, the region added more than 40,000 jobs.
New Jobs, But Not Many
Lynn Reaser, chief economist at Point Loma Nazarene University, said the national economy grew slowly last year, by an annualized rate of less than 3 percent. This year, Reaser estimates that the national gross domestic product will rise by 3.5 percent.
That will result in new jobs, but not enough to make a real dent in the national or San Diego jobless rate. In December, the national unemployment rate was 9.4 percent, while the county figure was 10.1 percent.
In fact, it won’t be until 2015 when the national rate returns to pre-Great Recession jobless levels of 5.5 percent, Reaser said.
Nationally, Reaser said some 88,000 new jobs were created in 2010. In 2011, she forecasts some 200,000 new jobs.
Marney Cox, chief economist for Sandag, or the San Diego Association of Governments, the regional planning agency, said San Diego lost more jobs proportionately than the national average. Considering that its economy is about 1 percent of the nation’s, the county should have lost around 70,000 jobs. But the area actually shed some 103,000 jobs during the recession.
Cox criticized the stimulus spending enacted in early 2009 as shortsighted, and said it may forever change the way the economy reacts.
Less than 10 percent of the $787 billion in stimulus funding created jobs with a multiplier of greater than one. Other federal funds were used to shore up the auto and banking industries, protecting jobs, but not investing in new job creation.
In the past, when economic forces were allowed to play out without massive government intervention, recessions were shorter, and job growth, mainly from smaller and newer businesses, was much stronger, Cox noted.
Because consumer spending accounts for about 70 percent of the economy, the recovery has been tepid at best. Consumers are paying off debt, and saving more, which may be good in the long term, but the reduced spending results in fewer jobs, he said.
In the last major recession of the early 1990s, job recovery was far stronger. In 1993-94, the region added 8,300 new jobs, spread out across five distinct categories. In 2009-10, the region created only 6,000 new jobs, but 70 percent of those were in professional services, and half that figure was in temporary workers, Cox said.
The fact is that it’s easier and more cost effective to boost lower paying job segments, but that prescription will likely hamper a more vibrant economy for the long term.
Greater investment into an infrastructure that creates skilled jobs in such industries as wireless telecom, biotechnology and software would be a wiser solution to improve the area’s economy in the long run, Cox said.