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Economy Steamrolls Into 7th Solid Year

Tech Industries Drive Region’s High Growth Rate

San Diego’s booming high-tech economy should continue to grow this year, but not as strongly as last year, according to a panel of local experts.

“This is going to be another good year, and the seventh year of an expansion,” said Kelly Cunningham, research manager for the Greater San Diego Chamber of Commerce’s Economic Research Bureau.

“We’ll likely see a bit of slowing, but it’ll still be a good year.”

Cunningham said sometime later this year the gross regional product, the value of all goods and services produced in San Diego County, will hit the $100 billion mark, up from last year’s estimated total of $94.4 billion.

Using a formula that takes the inflation rate into account, the local economy grew 5.2 percent; for this year, the projection is 4.5 percent, according to the chamber’s research bureau.

That’s still better than the 4 percent growth forecast for the entire California economy, and well above the 2.5 percent rate for the entire nation.

The main engines for the region’s above-average growth lies in the flour shing high-tech cluster industries that have now nearly entirely replaced all the defense and aerospace jobs that were lost during the early part of the 1990s, the experts said.

“If you look at four of the clusters , software, communications, biotechnology, and computers and electronics , each has generated about 20,000 jobs. That’s a number that just about equals what we had in defense jobs at the peak we reached in the late 1980s,” said Marney Cox, director of the research arm of the San Diego Association of Governments.

Besides regaining better paying jobs, the diversification puts the region in a much better position because it is no longer dependent on a single industry, Cox said.

“It adds more stability to the economy,” he said. “One cluster can continue to grow, and make up for a cluster where there may be no growth or a loss of jobs.”

While the high-tech clusters are thriving, Cox noted the fastest industry group over the past four years is one that was decimated in the early part of the decade. The financial services sector nearly doubled the number of jobs added here from 1994 to 1999, bringing the total to 18,594.

Cox said the sector, which includes people working for banks, mortgage brokerages, investment and insurance companies, is expected to expand by 15 percent in 2000.

The next fastest-growing clusters this year should be software, 12 percent; biotechnology, 10 percent; and communications, 10 percent.

Cox calls that particular sector communications but it’s mainly telecommunications manufacturing. Cunningham said the sector now employs some 22,800 people, with about half of that at Qualcomm, Inc. alone.

Like the state, the San Diego area’s biggest manufacturing product are electronics and electrical equipment.

The panel tempered its generally rosy projections with warnings that inflation could approach 4 percent, especially if the cost of housing continues to rise.

Peter Reeb, president of San Diego-based Reeb Development Consulting, said while lower job growth this year may lead to decreased demand and lower price appreciation, there is still greater demand than existing supply.

“We are projecting appreciation rates in the range of 5-6 percent vs. the double-digit rates of appreciation seen over the past few years,” he said.

Reeb’s estimate on the median housing cost was on the low end. Cox estimated that cost at 15 percent greater than last year, and the consensus average was 9 percent.

Cox said to solve the problem, cities have to change a general prejudice against constructing more attached, higher-density housing. But to do that will require providing incentives for this type of construction, and reform on the statewide level, he added.

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