Last month’s North County Economic Summit gave hundreds of local business leaders a read on the future, literally.
The 10th annual summit, hosted by the San Diego North Economic Development Council and held May 11 at California State University San Marcos, drew nearly 400 industry leaders, policymakers and experts to discuss the latest national economic trends and projections.
The event also gave those in attendance a chance to look over the highly anticipated North County Indicators Report from the SDNEDC, whose mission is to market the north San Diego region for inward investment, retain employment by helping businesses solve specific business challenges, and connect students and employers to strengthen the workforce.
The indicators report illustrates key measures of North County to spark informed conversations about the region’s future. It also serves as a reference to better understand the evolving economic landscape.
The report, which can be viewed at 2023-Indicators-Report.pdf (sdnedc.org), includes more than 64 indicators and complementary data sets that are designed to provide a holistic measure of North County’s economic ecosystem. It was authored by SDNEDC CEO W. Erik Bruvold; SDNEDC Marketing and Events Coordinators Sofia Ayad and Caitlyn Canby; and BW Research Group analysts Josh Williams, Julian Ugalde and Ryan Young.
The report listed a top challenge for North County – and the rest of the world – as transitioning to a decarbonized economy, which is being pushed by volatile gas prices, reduced expenses of renewable energy and growing costs and concerns around climate change. All have already provided a catalyst for new investments and planning.
Artificial intelligence and machine learning also have the potential to disrupt the economy. The emerging technologies are not only driving businesses directly involved in developing AI solutions but they are also an enabling tech for firms providing cybersecurity, supply chain management and healthcare solutions.
Looking at evolving supply chains was part of the report – a big deal since North County’s concentration of manufacturing employment is 50% higher than San Diego County – or the entire state of California. The manufacturers are connected to a complex supply chain producing high-value products with large employment multipliers.
The report also spoke to certain areas in North County that are hiding pockets of economic distress.
North County represents one-third of the population and more than 40% of the economy in San Diego County, says Williams, president and principal researcher of Carlsbad-based BW Research. Almost half that population has a bachelor’s degree or higher, adding to the long-term economic success of the region.
“California is the fourth largest economy in the world, on its own,” Williams reminded the crowd.
Charles Dougherty, vice president and senior economist at Wells Fargo Corporate and Investment Bank, presented his insights on the current state of the national economy and his forecasts for the coming months.
His analysis included the forecast of a mild recession later this year and possibly into the first quarter of 2024. Dougherty emphasized the challenges associated with achieving the Federal Reserve’s target inflation rate of 2% and the implications of a modest uptick in unemployment rate as the recession unfolds.
Dougherty said that when people “hear the term ‘recession,’ the little hairs on the back of their neck go up, and understandably, because we’ve just been through some of the biggest recessions,” but he said that in contrast to the declines of 2008 (of 4%) and 2020 (10%), the predicted 2023-24 recession will likely only reach just about a 1% decline, he said.
“We have some turbulence ahead of us, but if you’re going to go into a downturn, you want to go into it with a relative position of strength,” he said, expressing a belief that the U.S. is in that position.
In recent years, people have been able to stockpile their savings, partly because of not going out during the Covid-19 pandemic, and also because of financial stimulus help from the government. Along with that, businesses have been profitable and home values have increased, allowing for the building of equity.
And as a result, consumers now have a smaller income-to-debt ratio, and that drives consumer spending.
Dougherty said: “Inflation is the highest it’s been in the last 40 years, and consumers aren’t happy about it, but they are still going out and spending.”
Dougherty believes this is the peak of the Federal Fund’s interest rate target range, and it is not likely that interest rates will soon be going back. Learning about the fallout during previous times of back-to-back recessions when interest rates were lowered too quickly, Dougherty said the federal government will likely hold this rate for the remainder of this year.
“There’s only one way the Fed knows to get inflation to slow down, which is to slow down the economy,” Dougherty said.
Williams said the key word for this year is “transitions.”
“North County and San Diego County as a whole are experiencing things that are kind of ahead of the rest of the nation,” Williams said.
He said that included leading the effort toward renewable energy, and he said North County should lead the shift to a decarbonized economy.
“We’re already at 59% renewable energy in California, but the last 40% is going to be tough; it’s really a 30-year plan,” Williams said. “New jobs will outnumber lost jobs by as much as 10 to 1 as we transition to a decarbonized economy.”
The three-hour event helped local leaders connect with others in the region and explained national and international economic trends that will impact the region, said Alan Tornel, marketing supervisor at San Diego PACE.
“The speakers did an excellent job of shedding light on the issues that we are facing,” Tornel said. “We learned about the impact of interest rates and inflationary fears on the economy, how the military presence and innovations clusters could impact the region, and how to make sense of a slowing economy and tight labor market.”