The Cities
of
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Antioch
Albany
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Dublin
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Newark
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Piedmont
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Alameda County
Contra Costa County
This forecast was prepared by:
Economist
Ryan Ratcliff
UCLA Anderson Forecast
www.uclaforecast.com
East
Bay EDA Contact
Robert Sakai
Technology & Trade Director
(510) 272-3881
robert@eastbayeda.org
East
Bay EDA
1221 Oak St., Ste. 555
Oakland. CA 94612
(510) 272-3885
Serving the East Bay
- the Bright Side of the
San Francisco Bay
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JULY 2007 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 a more printable copy of the East Bay Quarterly
Forecast by clicking here.
To view the Bay Area "by the numbers",
please take a look at our
Quarterly
Indicators Sheet for Q2 2007. This
one-page summary includes GDP, CPI,
employment, housing, construction permit,
hotel, airline passenger, and foreign trade
data.
By David Shulman
Last September we highlighted our view that the U.S. economy was headed for a soft landing, albeit one with a great deal of turbulence
caused by a rapid deterioration in the housing market. Although the actual
data didn’t turn out exactly as forecast, it turned out to be a reasonably good
description of the past few quarters. Real GDP growth stalled at a revised 0.6%
growth rate in the first quarter and we forecast that the economy will be
growing at less than a 2% growth rate in both the second and third quarters and
then only modestly exceed 2% in the fourth quarter.
(Continue reading "The
Nation")
by Ryan Ratcliff So far, 2007 has been a bit of a puzzle. Falling sales,
weak prices, and rising foreclosures have continued to be the rule in local
housing markets, and both national and state measures of construction activity
suggest that real estate has been a drag on economic growth for close to a year
now. But in spite of all this bad news from real estate, the wider California economy is mostly unfazed: job growth has slowed only slightly, and we’ve seen
only a minor uptick in unemployment.
(Continue reading "The
State")
The building boom made the East Bay the bright spot in the
Bay Area economy over the past few years. Unfortunately, what the boom giveth,
the bust taketh away: real estate has become a serious drag on the East Bay economy, as the combination of a slow but steady loss of real-estate related
finance jobs has been exacerbated by the long-anticipated downturn in construction
employment. Year-over-year growth in non-farm payrolls has slowed to just
above 1%, with the unemployment rate rising to 4.5% after bottoming out at 4%
near the end of 2006.
(Continue reading "East
Bay Overview")
While California’s year-over-year growth in non-farm
payrolls has been slowing since the middle of 2006, the Bay Area had been
largely immune to this slowdown thanks to recovery of the technology side of
the Bay Area economy. This only seems fair. The Bay Area continued to suffer
from a tech sector hangover long after the rest of California was shrugging off
the 2001 recession, so now the Bay Area’s tech recovery should be helping when
the rest of California is starting to slow. However, the data from the first
half of 2007 show that the Bay Area has not been able to completely ignore this
slowdown. Unemployment has been edging up for most of the year, and non-farm
payroll growth is slowing throughout the Bay Area. Even with this slowing, the
San Francisco and San Jose metros still rank among the fastest growing regions
of California. However, the East Bay looks much more like the rest of California, largely because its reliance on real estate as an engine of recovery in the
past few years has been much more like the rest of the state.
(Continue reading "Employment
Update")
For the Bay Area as a whole and the East Bay in particular, the 2007 housing market continues to show the pattern of flat prices and falling sales that we’ve seen throughout California – at least in broad terms. The specifics of these trends in the East Bay have actually proved somewhat unique. The second half of 2006 saw outright price declines in the East Bay that were among the most severe in California.
However, in 2007 both markets have not only erased these losses but have established all-time highs for median sales prices. But before we crack open the champagne to celebrate the end of the real estate doldrums, a more in-depth look at these numbers is required. This kind of volatility in median sales price suggests that in today’s low volume market, the month to month changes in the mix of homes sold is obscuring the longer-term trends of slightly rising prices in Alameda County and slightly falling prices in Contra Costa County.
(Continue reading "Housing
Market Update")
Be Sure to Wear Some Flowers in Your Hair… If You Have Any Left
The most lasting effect of the collapse of the tech bubble in 2001 has been demographic. From 2001 to 2005, approximately 250,000 residents moved out of the six county area defined by the San Francisco MSA and Santa Clara County (i.e. Marin, San Francisco, Alameda, Contra Costa, San Mateo, and Santa Clara Counties).* While natural increase of the population and foreign immigration were able to offset some of this exodus, this wave of out-migration slowed population growth in all the counties in this area to below 1% for several years, and has quashed any hope of a quick recovery to pre-recession employment levels. The good news is that the tide has finally turned. Net migration (foreign plus domestic) is now positive for all counties in this six county region, and is rising for all the counties except Contra Costa.
(Continue reading "The
Aging of the Bay Area...")
More Retirees = Slower Job Growth
The aging of the Bay Area holds a potential double whammy for the economy. A higher share of residents over 65 means labor force participation will most likely fall in the coming years. Coupled to the projected slowdown in population growth, this means that growth in the local labor force may slow dramatically in the next 35 years. Since in the long run local employment can grow no faster than the local labor force grows, this combination of factors could lead to a long-term slowdown of the Bay Area economy. Like many things in economics, this story is grossly oversimplified, yet retains a central kernel of truth. To get a better sense of the subtleties involved, we’ll proceed in several steps.
(Continue reading "More
Retirees...")
Changes in Spending Patterns
It probably comes as no surprise that spending habits of older Americans are somewhat different than the national average. As a larger share of the population moves into these older age groups, we should expect to see buying patterns of the population as a whole change. The BLS’ Consumer Expenditure Survey offers some insight into what we might expect, assuming that the 65-year olds in 2040 have the same consumption habits as 65-year olds today. The data is primarily available for Census Regions, which lumps the Bay Area in with most of the western U.S. However, the limited data that is available for the San Francisco MSA suggests that aside from spending a higher share on Shelter and lower share on Transportation, the expenditure shares of Bay Area residents aren’t that different from the rest of the West.
(Continue reading "Changes
in Spending...")
About the only thing we can predict about
the Bay Area in 2040 are the demographic
shifts that we can expect based on today’s
population. However, these demographic
changes have wide ranging implications for
the nation and state, but are even more of a
factor for the Bay Area thanks to its
above-average concentration of older
residents. As a bigger share of the local
population moves into retirement, labor
force growth in the region will likely slow
even if baby boomers retire later than
previous generations. The only way that this
slowdown will not be a brake on the future
growth of the Bay Area economy is some
combination of in-migration to the area
(from both the U.S. and abroad) and
continued technological progress that allows
the Bay Area to produce more with the same
amount of inputs. The differences in the
spending patterns of older Bay Area
residents will also be a major force in
shaping the economy over the next 45 years,
as spending on mid-life luxury goods is
supplanted by increased spending on health
care.
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