Employment: Energy Crisis Is Still the Wild Card in County’s Economic Future
The San Diego economy is already well into a slowdown mode, but predictions of a full-blown recession are exaggerated, say several economic analysts.
Recent reports from the state’s Employment Development Department and the University of San Diego Index of Leading Economic Indicators show the county lost a large number of jobs last month and isn’t growing as rapidly, but an actual decline in growth probably isn’t in the cards.
“I still see growth in San Diego for 2001 if for no other reason than our economy appears to be doing stronger than the rest of the nation, and there’s just more room to slow down and not to go negative,” said Howard Roth, an economist with Freeman Associates Investment Management in Rancho Santa Fe.
While the latest unemployment report from the state showed a decrease of more than 16,000 jobs in January, the unemployment rate stood at 2.7 percent, which was lower than the 3.1 percent in January 2000.
Kelly Cunningham, an economist for the San Diego Regional Chamber of Commerce, said the January rate is a record, the lowest since 1957 when the rate was 2.9 percent.
“We’ve had some fairly good job creation last year, and the indicators we see still show the economy is still strong,” Cunningham said.
According to the EDD, the region added 43,600 new non-farm jobs last year, a 3.8 percent net gain from 1999. About half of those new jobs, nearly 23,000, came from the services industry.
The USD Index dropped in December by 0.3 percent, making it the sixth consecutive month the local index declined.
Although the measurement showed big drops in local stock prices and in the amount of help-wanted advertising, there were solid gains in the number of building permits, and in lower unemployment insurance claims, which is registered as a positive.
Alan Gin, the USD economics professor who compiles the index, said the magnitude of the December decrease wasn’t as severe as in some of the most recent months, and only three of the six components of the index showed a decline.
He said the outlook for the local economy remains the same: “The local economy will hit some rough spots in 2001, but it is unlikely they will be severe enough to be considered a recession.”
Roth said the employment figures may not have matched the numbers in 1998 when the region generated more than 51,000 net new jobs, but it still produced more than 40,000, the fourth consecutive year that number has been exceeded.
Roth cited recent national figures showing increased retail sales and the national index of leading economic indicators in January as being positive, which could influence the Federal Reserve Bank to keep the current interest rates intact when it meets this week.
Since the beginning of the year, the Fed has reduced the federal funds rate by 1 percent.
The wild card in California’s , as well as San Diego’s economy , of course, is the state’s energy crisis. Cunningham said higher energy prices take money out of consumers’ hands. If prices get too high, it could cause companies to cut back on employment and result in further loss of consumer confidence.
Despite all the bad news, Cunningham was sticking to an earlier prediction the gross regional product, the total of all goods and services produced, would grow 3.5 percent in 2001. That’s down from 2000, when it grew 6.4 percent, but the net growth offers some positives, economists said.
