Experts shared a mixed economic forecast Thursday, erring on the optimistic and predicting slow job growth in 2010. A renewed threat of terrorism and the federal government’s rapidly accruing debt, however, could create a double-dip recession that would halt recovery, they said.
Panelists on the 2010 San Diego County Economic Roundtable agreed on many points — namely, the recession has ended, and the economy is crawling out of dark days — and a common thread was spread through their presentations: “Things are less bad than they were,” said Alan Gin, an associate professor of economics at the University of San Diego’s School of Business Administration.
Gin and colleagues shared the sentiment — that things are less bad — and outlined key indicators that may show the worst is behind us.
Gin, who said 2009 was the “worst year ever, as far as the local economy is concerned,” said in the waning days of 2009, the county was on track to lose 50,000 jobs, and the unemployment rate hovered in double digits for six consecutive months.
Gin, who, admittedly, gave a grimmer forecast than others, said if the economy hasn’t bottomed out yet, it will in the first half of 2010. Growth, he predicted, would be weak, but we will see an upturn, he said. He expects to see increases in housing prices and the number of building permits, and 3,000 to 5,000 new local jobs.
Buoyed by gains in the housing market, the rebounding national economy and the remaining economic stimulus dollars, Gin said the local economy may begin to stabilize.
“Things are getting better,” he said cautiously. “But we’ve still got a long way to go.”
Don Steuer, the county’s chief financial officer, agreed with Gin, saying things are “less bad,” though still uncertain.
Steuer said the county is facing a decrease in revenue and increases in demand for services. The weak local real estate market impacted the county’s revenue from property taxes, and record-low consumer confidence restricted sales tax revenue.
The challenge at the local level is compounded by the potential for the state to borrow funds from cities and counties, Steuer said. The county could lose up to $72 million, furthering the crunch on local government.
But the housing market — which Steuer said led the economic slide — is expected to remain flat, or make small gains, said Sharon Hanley of The Hanley Group, a building industry market research firm.
Hanley predicted if developers secure financing, home sales could increase 10 to 15 percent, and sale prices will increases 5 percent. “Finance is what’s keeping most builders out of the game,” she said.
Lynn Reaser, chief economist at Point Loma Nazarene University, said national economic recovery will likely be a V-shape — a sharp incline, following a sharp decline. The incline, however, may be “less robust” than is typical after a downturn, she said. Reaser shared a “pretty optimistic forecast,” predicting small gains for the stock market, an increase in demand, and job growth to resume this year.
Unemployment will lag behind recovery, she said, as the job market absorbs the unemployed and new job seekers. But, she predicted the unemployment rate would fall back to 9.5 percent. Bloomberg predicted unemployment stayed at 10 percent in December.
“Leading indicators suggest we’ve seen a turning point in the job market,” Reaser said. “There has been some improvement in the job outlook. Businesses saw enormous increases in productivity last year, but those kind of productivity gains can only stretch workers so far, before businesses start to lose sales and can’t service clients.”
Reaser forecasted growth “through most areas of the economy,” with emphasis on growth in the health care, accounting and tech sectors.
But, she said, new hires can expect to take up to a 30 percent cut in wages from their previous salaries.
And, Reaser said, “there’s no shortage of things to keep (worriers) awake.” A botched terrorist attack on an airliner Christmas Day renewed fears of terrorism — a severe threat to the national economy, she said. The “explosion in federal debt” is another threat, she said.
“The federal budget deficit is expected to grow a trillion dollars each year for the next 10 years,” she said. “The White House and the administration will have to deal with the federal budget deficit if they want to sustain economic expansion.”
Joseph Peña is the business editor for San Diego News Network. He can be reached at joseph.pena(at)sdnn.com. Follow him on Twitter @josephpena.