Cunningham Says Local Economic Recovery Losing Momentum

Kelly Cunningham, economist for the National University System Institute for Policy Research, says in his July "Economic Ledger" that the San Diego economy may go through "another painful adjustment and retrenchment," although he doesn't necessarily see a double-dip, or return to recession. In a comprehensive report, Cunningham notes that in the last quarter of 2008 and the first two quarters of 2009, taxable retail sales dropped at annual rates between 15.4% and 18.8%. He believes they dropped 13% last year. He projects only a 0.8% inflation-adjusted rise this year and 1.5% next year. On a per capita basis, sales will drop this year and barely rise in 2011. Population will grow just 1% this year and 0.9% next year, he forecasts. In recent years, more people have been moving out of the county than moving in.

He has an excellent analysis of employment trends. Jobs in construction, retail, manufacturing, finance, and real estate services "are not likely to return any time soon," warns Cunningham. The defense industry, a long-time San Diego stalwart, is vulnerable "as the federal government brings down the deficit." But there are positive signs: business services jobs have been rising since late last year, and consumer confidence and help-wanted advertising are trending up.

After soaring inordinately, then dropping more than 40%, housing values have been rising impressively for 12 consecutive months. But Cunningham doesn't see this pace of increase continuing. Statistically, housing construction may appear to bounce back sturdily, but the "numbers will remain at recessionary levels."

"Financial crises tend to produce weak recoveries," says Cunningham. He pointed out previously that San Diego's economy is extremely real estate-intensive. In fact, only the economies of Orlando and Miami are more dependent on real estate. That is sobering.

Comments

The only trend I have seen are more commercial space for lease and going out of business signs...On the charitable scene, people are picking and choosing their events and limiting them somewhat.... luckily in this town there are some tremendously generous folk..not just money, but volunteers as well.

Response to post #1: Charitable giving is on the decline all over the U.S. If San Diego is an exception, that is a great feat. Best, Don Bauder

The entire country has been in the toilet since 2008-that is 2 years. I can see it staying in the toilet for another 2 more years.

The dismantling of our middle class over the last 30 years by shipping our manufacturing, and tax, base overseas has now hit home.

Deflation is already setting in, and the cause of deflation is lack of jobs.

Volunteer service to others has been tested in San Diego before, and we came off during the 2007 wildfire incident complex looking a lot better than New Orleans immediately after Katrina.

Even so, there are areas in which we can improve. FEMA still reports problems with well-meaning but untrained "spontaneous" volunteers, somethimes so many that critical emergency response resources get tied up by handling those spontaneous volunteers rather than managing the initial incident by objects.

The time to get emergency responder training is BEFORE the incident that requires our collective emergency response, especially when our current and mid-term projected economic weakness makes improvements in tax-funded paid professional responder resources unlikely.

See Community Emergency Response Team (CERT) lessons in basic search-and-rescue training at:

http://www.citizencorps.gov/cert/training_mat.shtm

See CERT lessons at for getting your neighborhood organized at:

http://www.citizencorps.gov/cert/start.shtm

Also see "Developing and Managing Volunteers" (part of the FEMA Emergency Management Institute's Professional Development Series of free online courses) at:

http://training.fema.gov/EMIWEB/is/is244.asp

Response to post #3: The Fed pays insufficient attention to unemployment. Its overriding concern is welfare of banks. And, since Bernanke says he won't raise interest rates until unemployment goes down, the banks are basking in free money.The fed fund rate will remain around zero indefinitely. Wall Street loves it. Main Street? Who dey? Best, Don Bauder

Twister, that is a great question. Exactly what are we trying to get back to? Greed, cheap credit and over-zealous spending on useless items that go into storage units when your house is foreclosed on? Never has the need for this been more prevalent: "Those who cannot learn from history are doomed to repeat it."

Response to post #4: FEMA is learning. It used to go into areas hit by natural disasters and give citizens cheap loans so they could rebuild in the same place and get whacked again. It doesn't do that anymore. Best, Don Bauder

Response to post #6: Good point. We should not try to go back to where we have been -- consumer spending more than 70% of GDP. But what other sector is going to feed the economy? Best, Don Bauder

Response to post #7: I'd love to see our manufacturing base restored, but it's not going to happen. Best, Don Bauder

Response to #4: "we came off during the 2007 wildfire incident complex looking a lot better than New Orleans immediately after Katrina"

That comparison was made at the time primarily by self-aggrandizing politicians, and it is an apples to oranges comparison completely unfair to New Orleans.

Most of San Diego was unaffected by the fires, including the vast majority of the richest coastal areas. There were lots of people with the means to help and there were plenty of evacuation locations for both people and animals.

In New Orleans, EVERYONE was affected, and the neighbors nearby the extreme flooding had either evacuated or were hard at work dealing with their own major weather damage.

The comparisions between New Orleans and pretty much anything fail, in part, because floods on that scale disrupt the energy grid. That is what made Katrina so devastating and helped illustrate just how much modern urban cities rely upon the grid. Even if the fires had burned to the coast responders would have been deployed within hours to get the city back working again.

What should concern LA (and to an extent us) is a massive earthquake that cut water and power to LA. They spend A LOT of time planning for that possibility but an 8.0 that knocked out the CA aquaduct pumping stations and created a cascading failure in the transmission grid could make for scary times in the Southland.

Response to post #11: Yes, about the most invidious comparison one can make is saying that San Diego did well handling the fires while New Orleans did poorly in the aftermath of Katrina. They are completely different situations -- particularly in severity. And, actually, San Diego did not do so well handling the fires, although the mayor's office did a good job manipulating publicity. Best, Don Bauder

Response to post #12: You're not kidding: the possibility of an earthquake knocking out the grid and water delivery is indeed scary. Are either LA or San Diego preparing for the possibility? Best, Don Bauder

I understand the criticisms of a comparison between San Diego and New Orleans after their respective disasters, but even in the hardest hit areas of San Diego County during the 2007 wildfire incident complex, local residents in Ramona and Alpine/Crest seemed to rise to the occasion, in some cases defying mandatory evacuation orders to save their homes and those of their evacuated neighbors. This is attributable to the proper prior planning done by those individuals on their own after 2003 (and not necessarily to any prior assistance they may or may not have received from any local government unit).

My interest is not in state and local government emergency services that are being cut back now and will probably not be restored to pre-Crash of 2008 capabilities for the foreseeable future. I am much more interested in my neighbors being able to take care of themselves and others in the first critical/vital days after a disaster, the period when the National Response Framework advises ordinary citizens that WE ARE ON OUR OWN.

http://www.fema.gov/pdf/emergency/nrf/nrf-core.pdf

In the first hours and days after a major disaster, we stand the greatest chance of death or disability caused by that disaster, precisely when we are still waiting for the cavalry to come charging over the hill to our rescue, something that might be delayed for days, weeks, or in the case of BP in the Gulf of Mexico, months or years. If we don't make more than minimal preparations to survive (going a good distance beyond the minimal recommendations that we receive in our mailboxes from county supervisors), then we are on our own AND up a creek without a paddle...

If there was a well-publicized San Diego shortcoming by local government during and after the wildfires, then it was the non-compliant paperwork submitted by two debris hauling contractors, subjecting the City to a loss of million$ in federal reimbursement -- for non-compliance with the NIMS/ICS/FEMA standards that are required for federal response expense reimbursement, coming AFTER published reports that some City employees had been caught cheating on FEMA Emergency Management Institute exams...

We all know what firm was hauled up to testify in front of CPUC's Consumer Protection and Safety Division for causing the wildfires in the first place, so that local firm shall go nameless here...

Response to post #15: Why do you insist on keeping the local utility nameless? It's spelled S-E-M-P-R-A. Its carelessness greatly caused the fires, and it got a wrist slap. Best, Don Bauder

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