Summary
Labor Market Update
2008 Tax Rebates
Conclusions
The
Cities of
Alameda
Antioch
Albany
Berkeley
Brentwood
Dublin
Emeryville
Fremont
Hayward
Livermore
Newark
Oakland
Oakley
Piedmont
Pittsburg
Pleasant
Hill
Pleasanton
Richmond
San
Leandro
San
Ramon
Alameda County
Contra
Costa County
This forecast
was prepared by:
Economist
Ryan Ratcliff
UCLA Anderson Forecast
www.uclaforecast.com
East
Bay EDA Contact
Stephanie Brown
(510) 272-6843
stephanie@eastbayeda.org
East
Bay EDA
1221 Oak St., Ste. 555
Oakland. CA 94612
Serving the East Bay
- the Bright Side of the
San Francisco Bay
For more information on
the East Bay visit
www.eastbayeda.org
Archived newsletters & forecasts
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JANUARY
2008 EDITION
INTRODUCTION
East Bay EDA is
pleased to provide the East Bay Quarterly Forecast, authored by Ryan
Ratcliff, Economist for the UCLA Anderson Forecast.
Download PDF (417k)
To view the Bay Area "by the numbers", download the
Quarterly Indicators Sheet for Q4 2007. This one-page summary includes GDP, CPI, employment, housing, construction permit, hotel, airline passenger, and foreign trade data.
by Ryan Ratcliff
Summary
This installment of the East Bay report looks at two issues. First, we close the book on 2007 by making a survey of labor markets trends in the various regions of the Bay Area. Even though the Bay Area has come down a bit from the rapid pace of technology job growth in 2006, it remains one of the fastest growing regions in California. Unfortunately, the East Bay has now slipped into the bottom half of the state’s job growth rankings, as the combination of an above average exposure to real estate weakness and the Bay Area’s overall slowing has created overall job loss at the end of 2007 -- a first since the dark days of the tech bust. However, we can’t entirely close the book on 2007 for a few months – all of this employment data will be substantially revised in March, and these revisions will be the primary focus of next quarter’s report. We use an alternative survey to make some educated guesses about how these revisions will affect the Bay Area’s economies: for the most part, it’s not good news. In general, real estate weakness is probably even worse than the current numbers indicate. And in a blow that may particularly hurt the Bay Area, the recent small but important gains in Durable Goods manufacturing in San Jose (and to a lesser extent the East Bay) may be overstated in the current data. Of course, these are just guesses – we really won’t know for sure until March.
Continue reading "Summary"
While the Bay Area labor market on balance remains slightly better off than California as a whole, the job market news in the fourth quarter of 2007 was almost all bad. The East Bay / Oakland Metropolitan District (MD) posted overall job losses for the first time since 2004, as real estate related jobs losses swamped small gains in other sectors. Beyond the East Bay, both the San Francisco and San Jose metros have seen job growth in the tech sector slow significantly. However, relatively low exposure to job losses in Construction when compared to the rest of California make the San Francisco and San Jose regions two of the bright spots remaining in the state economy, even with this slowdown in tech job growth.
Interestingly, the San Jose MSA was one of the few regions of California to see an acceleration of job creation at the end of the year, fueled by a fourth quarter explosion of Leisure and Hospitality employment. Thus, we can view the East Bay’s job market at the end of 2007 as the sum of two parts: the overall slowing in the Bay Area economy, exacerbated by housing weakness. To understand the interaction of these two forces, we’ll first focus on some statewide and Bay Area trends, and then talk specifically about how these trends are interacting with the housing weakness in the East Bay.
Figure 1: Year-over-Year Growth in Non-Farm Payroll Employment
Source: CA EDD, UCLA Anderson Forecast
Figure 2: Quarterly Changes in Non-Farm Payroll Employment (1000s SA)
Source: CA EDD, UCLA Anderson Forecast
Continue reading "Labor Market Update"
While there’s still quite a bit of debate around whether or not we will actually see a U.S. recession in 2008, almost every observer will agree that we’re in for a bumpy ride that includes sluggish GDP growth (the UCLA Anderson Forecast’s prediction is 1.9% for 2008), elevated unemployment, and continuing carnage in the financial markets. With this sort of prognosis for 2008, it’s no surprise that much of the talk in Washington and on the campaign trail has turned to what the government can do to minimize the damage.
We economists and the Federal Reserve have
been fretting about this question much
longer than you might think. The decline in
housing construction has shaved about 1% off
of real GDP growth since mid-2006, which was
also around the time the Fed switched from
its strategy of slow but steady increases in
the Federal Funds rate to standing pat at
5.25%. While the Fed’s primary worry in the
first half of 2006 was that inflation would
continue its slow upward creep out of
Bernanke’s comfort zone, the increasing
weakness in residential investment suggested
that risks of further inflation versus an
economic slowdown were probably pretty even,
leading to this split the difference
strategy of staying put at 5.25%.
Continue reading "Congress Saves the
Day..."
The outlook for the East Bay in 2008 is mostly gloomy: with the Bay Area’s specialty industries slowing and an overexposure to housing weakness, the East Bay economy will likely continue to underperform relative to the overall California economy. As we pointed out, there are some small doses of good news from trade-related activities like Warehousing and Transportation. The employment impact of these sectors is small, but their capital/space intensive nature means that this understates their overall contribution to the local economy. Even so, these industries are a small silver lining in a big dark cloud. And while we think the stimulus packages will not significantly improve matters in either the U.S. or East Bay economies, the potential increase in the GSE’s conforming loan limits is probably the policy action most directly helpful to East Bay economy. While it won’t cure the East Bay’s housing ills overnight, it removes one of the major roadblocks to a housing recovery.
THE STATE
By Ryan Ratcliff
Like the national forecast, the central theme of the California forecast remains the same: real estate weakness will create a sluggish economy, but will not be enough to tip the state into a recession. There are, however, a number of state-level developments that have cast doubt on some of the finer points that support our no recession forecast. This installment will concentrate on several of the key recent developments.
Overall job creation for California has come to a standstill. Job loss in real estate-related sectors continues to be the main source of weakness as measured by the official Current Employment Statistics payroll series (CES). But lately, we are also experiencing weakness in retail trade and the normally strong professional business services.
Continue reading "Now is the Winter..."
THE NATION
By Ed Leamer and Patricia Nomura
Despite the stronger than expected 4% growth
in the second quarter, the re-pricing of
hitherto very easy credit will cause the
U.S. economy to have a “near recession
experience.” Specifically, we forecast real
GDP growth to be just above 1% for the
fourth quarter of 2007 and the first quarter
of 2008. Thereafter, we forecast growth to
remain tepid for the balance of 2008 and
return to trend 3% growth in 2009.
Nevertheless, by mid-2008 the unemployment
rate is forecast to reach 5.2%, up from the
current 4.6%. Of course, when the economy
slows to a 1% pace, it runs the risk of
falling into an actual recession, just as
when an airplane’s velocity gets too close
to its “stall speed” and it falls out of the
sky.
Continue reading "Nervous..."
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