Summary
Consumers Are Cautious, but Not in Panic
Tech Sector Suffers
Overall Employment Conditions in East Bay
The Housing Market Stabilization is Near
Forecast
The California Economy: Running Out Of Gas
Edging Backward Into the Future
Please, Please, Uncle Sam, Turn Us Around
The Global Slump
The
Cities of
Alameda
Antioch
Albany
Berkeley
Brentwood
Concord
Dublin
El Cerrito
Emeryville
Fremont
Hayward
Livermore
Martinez
Newark
Oakland
Oakley
Piedmont
Pinole
Pittsburg
Pleasant
Hill
Pleasanton
Richmond
San
Leandro
San
Ramon
Alameda County
Contra
Costa County
This forecast
was prepared by:
Economists
Levan Efremidze
with
Jerry Nickelsburg
David Shulman
Ed Leamer
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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APRIL
2009 EDITION
INTRODUCTION
East Bay EDA is
pleased to provide the East Bay Quarterly Forecast, authored by
Levan Efremidze
of the UCLA Anderson Forecast.
Click here to Download
the PDF (529k) version of this report.
This quarter's forecast includes executive
summaries of the UCLA Anderson Forecast's
National and California Outlooks,
authored by Jerry Nickelsburg, David Shulman,
and Edward Leamer.
To view the Bay Area "by the numbers", download the
Quarterly Indicators Sheet for Q1 2009. This one-page summary includes GDP, CPI, employment, housing, construction permit, hotel, airline passenger, and foreign trade data.
by Levan Efremidze
Summary
The East Bay economy is still in the midst of a recessionary adjustment driven by a multitude of economic forces. During the first half of 2008 the excesses of the preceding economic boom reached a critical point and households, businesses, and banks suddenly reversed their behavior from optimism and risk taking to pessimism and risk aversion. While the federal government is attempting to stimulate the ailing economy and the banking system, the state and local governments are slashing budgets and raising taxes. An enterprise economy like ours is prone to cyclical behavior, but this particular recession is more severe than ten others we have seen since the great depression; it is driven by the household debt defaults, housing decline, banking crises, and it is global. Previously a beneficiary of the economic boom, the East Bay is now bearing its share of adversity.
Continue Reading "Summary"
Households turned cautious last September, largely due to the sharply rising economic uncertainty stemming from the Wall Street-Washington’s juggling of the financial crisis and a real burden of ballooning personal debt. Since then, the personal savings rate at the national level (separate East Bay savings rates are not available) surged to 4.2% in the first quarter of 2009 (Figure 1).
Continue Reading "Consumers Are Cautious, but Not in Panic"
The East Bay economy is well known for its high tech sector, as an integral part of the overall Bay Area technology cluster. The overall economic recovery in the East Bay will largely be determined by the growth in this sector. Two important elements of this growth have been and will be the U.S. domestic demand for equipment and software, and exports.
Domestic equipment and software spending in the U.S. plummeted by 34% during the first quarter of 2009, in real terms, and this downturn is reflected in East Bay employment numbers. The East Bay’s durable goods manufacturing, nondurables, information, and professional and technical support services sectors are under pressure and continue to slash payrolls. In addition to these direct costs, the downturn also causes indirect losses in many other sectors that depend upon growth in the high tech sector. Spending by information technology workers by some estimates equals one third of the overall local expenditures (in the Bay Area) and a fall in earnings in such a large part of the economy will spillover to other sectors.
Continue reading "Tech Sector Suffers: Business Investment and Exports Plummet"
Although the East Bay labor conditions continue to sour, the speed of contraction is dropping. In this section we contrast job markets of East Bay, California, San Francisco Metro District, San Jose MSA and the U.S. We also examine quarterly dynamics of East Bay employment sectors.
The East Bay is experiencing the deepest employment recession since 1970. We do not know its duration yet. Figure 8a illustrates that employment has not recovered fully from the 2001 recession as manufacturing employment never returned to the previous peak due to increases in productivity and outsourcing.
Continue reading "Overall Employment Conditions in East Bay"
Housing is finally showing green shoots in the East Bay. While the prices have now dropped by more than 28% through December 2008 since the peak of June 2006, according to the fairly conservative OFHEO price index of comparable home sales, California Association of Realtors reported monthly price increases in some California markets for the month of March. The rise for the Bay Area was 1.2%. There were more regions with positive monthly change in California than with negative. DataQuick Services, another real estate research firm, reports a 1.6% increase in Contra Costa County and a -3.4% fall in Alameda County median home prices from February to March 2009. Is housing ready to bottom out? In our previous report we examined affordability of the housing in East Bay and found that a median income family could afford a median home with the current interest rates, assuming that they could come up with the down payment. We also found the supply side of the market was still putting pressure on the prices, with a high inventory of homes for sale and rising foreclosures. In this section we re-examine some of the fundamentals of housing and assess whether the housing recovery is close to a reality.
Continue reading "The Housing Market Stabilization is Near"
The East Bay is battered by the same cruel economic forces as the U.S. Although abnormal when compared to historical evidence, to a large extent the depth of the current recession is similar in for East Bay, California and the U.S. Before the recession, the East Bay was one of the biggest beneficiaries of the housing construction boom. But as the U.S. economy started to suffer with the balance sheet recession, the East Bay was not spared. The region continues to lose jobs; the unemployment rate is climbing and incomes are shrinking. In this report we examined the East Bay’s quarterly performance and its near term outlook within the context of salient economic factors, such as guarded consumer spending, plummeting business investment, shrinking global trade and a near-stabilizing housing sector.
Continue reading "Near
Term Forecast..."
CALIFORNIA
By Jerry Nickelsburg, Senior Economist, UCLA Anderson Forecast
In the last California report we struck a note of optimism about the coming quarter. What we did not expect was the spectacular Panic of 2008. California consumers reacted in a predictable way; they stopped shopping and began to conserve their resources. Our optimism remains only in tempering our pessimism. California is going to share the national recession with negative economic growth through the middle of next year and high unemployment into 2010. The U.S. recession will be unevenly felt across the state .The Inland Empire, Orange County, the East Bay and the Central Valley will be hit the hardest as the recession provides a double whammy with a generalized downturn in demand and a postponement of a recovery in residential construction. The coastal areas will not be immune as a U.S. downturn means that imports flowing through California’s ports will continue to decline, and recessions in Europe and Japan mean that export demand for California manufacturing will be muted. In short, the forecast for the next three quarters is one of contraction in economic activity followed by the beginning of a slow recovery.
Continue reading "The California Economy: Running Out Of Gas
THE NATION
By David Shulman, Senior Economist, UCLA Anderson Forecast
The news from the economy is bad. The recession that we had previously hoped to avoid is now with us in full gale force. We now expect that real GDP will decline by 4.1% in the current quarter and decline by another 3.4% and 0.8% in the first and second quarters of 2009, respectively. Because Europe and Japan are already in recession and China and India are suffering from a significant slowdown in growth, the export boom of the past few years will wane. Make no mistake the global economy is in its first synchronized recession since the early 1990s. Moreover, with tepid post-recession growth of around 3%, the unemployment rate is forecast to rise from October’s 6.5% to 8.5% by late 2009 or early 2010. Concomitant with the rise in the unemployment rate will be the loss of an additional two million jobs over the next year.
Continue reading "The Global Slump"
By Ed Leamer, Director, UCLA Anderson Forecast
Forecasting depends on some reasonable similarity between the current situation and episodes in the historical data. But there is SOOO MUCH over the last several months that we haven’t seen before. These abnormalities limit the power of statistical forecasting, forcing us to rely more on hunches. Just so you know, here are some of the features of the data that are so unusual, as well as some that are not that strange.
Continue reading "Edging Backward Into the Future
Please, Please, Uncle Sam, Turn Us Around"
FOOTNOTES
1 Here we report seasonally adjusted changes in
payroll employment from September to December of
2008. |
