San Diego Business Journal

Three of San Diego’s largest industry sectors are still creating jobs even in this time of deleveraging and uncertainty about the future.

The big three — health care, hospitality and professional/scientific — also show the most promise for future growth, say economic analysts.

While there is evidence of stout expansion occurring in the latter two sectors, the health care sector is, by far, the biggest generator of jobs in recent years and will be for many years to come.

“I’d say we are in an accelerated expansion mode,” said Steven Escoboza, president of the Hospital Association of San Diego and Imperial Counties, regarding the ongoing rise in both jobs and facilities in this region and across the state.

The factors behind the surge are numerous but foremost are simple demographics. The first wave of the baby boomer generation is in their 60s, and seeking services at a greater rate. Add to that a sizable and growing population of retirees here making increased demands on systems.

Another big driver is federal health care reform legislation instituted last year that requires every citizen to have access to health services by 2014. That mandate will result in an estimated 400,000 to 600,000 people in San Diego County alone who are without health insurance to begin receiving it, Escoboza said.

Staffing for Larger Facilities

Facility expansions by practically all health care providers are also creating a need for more skilled workers. In Escondido, Palomar Pomerado Health’s $1 billion Palomar Medical Center West with 288 beds is expected to open next summer. Scripps Health, another major provider, said it plans to invest some $2 billion during the next 25 years into its La Jolla hospital campus. Both Kaiser Permanente and Sharp HealthCare are also expanding.

According to a Moody’s Analytics report in August, health care employment in the county stood at 125,900, but it is expected to rise to more than 151,000 by 2016.

In addition to direct hires for health care workers, the sector’s growth will spill into a host of cottage industries affiliated with the health industry, including information systems, telecommunications device and network system operators, equipment suppliers, and experts such as Dr. Bill Mohlenbrock, who advises hospitals on ways of improving their systems.

Hospitals and doctors are being forced to adopt different ways of delivering care, and become far more efficient as a result of the federal government’s reduction of Medicare payments, Mohlenbrock said.

“They’re going to need information and systems to help do a better job of delivering health care,” he said.

Changes to Technology Landscape

In the last major recession in the early 1990s, San Diego’s technology sector was dominated by a handful of larger companies, most of them related to the aerospace and defense industries, said Kelly Cunningham, an economist with National University System Institute for Policy Research. “Today, the sector is made up of mostly smaller companies, but we’ve done pretty well in capturing some of these in the new industries,” he said.

San Diego’s professional and scientific and technology sector encompasses companies such as Qualcomm Inc., with more than 12,000 employees, to startups that have only one or two people, and includes biotechnology and life sciences, telecom, computers, information technology and software. According to a recent analysis by Beacon Economics, using July state employment data, it’s the fifth largest sector with about 123,600 workers or 12.5 percent of the total workforce.

“These are the firms that are creating high-value jobs that are creating such a high quality of life here,” said Brad Kemp of Beacon.

In 2009, according to Beacon’s report, the sector’s average salary was about $80,200, compared to the average wage across all sectors of $49,242.

Darin Andersen, general manager of Norman Data Defense Systems, based in Norway, said San Diego is establishing a growing cyber security sector that ranges from large companies such as General Atomics to smaller contractors, some of which are working on projects for the Space and Naval Warfare Systems Command, or Spawar, that’s locally based.

“This (cyber security) is one of the top three fastest-growing sectors in the federal government,” Andersen said. “Nearly every agency has been hacked over the last three years.”

Andersen, who is laying the groundwork to open a local office for Norman next month, estimated some 300 businesses operating locally are involved in some type of cyber security and employing about 5,000 workers. He said the sector should triple during the next 10 years “given the growth in the industry and San Diego’s regional attributes that make it a hot cyber market.”

Major Role in Local Economy

San Diego’s tourism and hospitality sector has always been a major part of the local economy, and as of August it counted 169,700 employees, according to the state’s regional employment report. That compared with 161,100 in August 2010, a gain of 5.3 percent.

Joe Terzi, chief executive for the San Diego Convention & Visitors Bureau, said the region had been slowly rebounding this year until the most recent few weeks, when a rising amount of negative news caused a pullback.

From a peak in 2007, when the hotel occupancy rate was about 73 percent, the rate plunged to 63 percent in late 2009, and has been trending up ever since, he said. As of the first quarter, it was at 67.6 percent, according to Beacon Economics.

Terzi said San Diego’s visitor industry struggles because some 80 percent depends on group and leisure purchases while only 20 percent is business related. But as the overall economy gets back to some normalcy and demand for rooms rises, room rates will increase and a lingering dependence on discounting will decline, he said.

The battered sector enjoyed some positive news this year when British Airways began direct flights between San Diego International Airport and London, and the plans for the construction of several new hotels were announced, including one at Legoland and another at Viejas Casino.

A more important project, the $550 million expansion of the San Diego Convention Center, is tabbed to break ground next year, but that assumes the financing is in place, Terzi said. “The design is done, the pricing is done,” he said. “The problem is, how are we going to pay for it?”