The regional economy is showing signs of continued growth in 2014. All six North Bay counties -- Lake, Marin, Mendocino, Napa, Solano and Sonoma -- are trending up in both leading and coincident indicators, showing that the region is in full recovery five years after the Great Recession of 2008--2009.
The U.S. economy continues to move at a relative moderate pace at the beginning of 2014.
Current forecasts have the U.S. economy growing gross domestic product (GDP) in real terms (inflation-adjusted) at 2.5 percent to 2.75 percent in 2014. Housing prices are also forecasted to continue their rise, though they are expected to slow down a bit from 2013's brisk pace.
In California, median housing prices for single-family homes saw an increase of over 20 percent year over year in 2013, the largest increase since the mid-2000s.
For 2014, that increase is likely to be more like 8 percent to 10 percent -- maybe a bit less.
Equity markets have reached new, nominal highs again; the S&P 500 is now close to its historic high in inflation-adjusted (real) terms.
Geopolitical issues, natural disasters and other potential downside risks have done little to shake investor confidence. Retail sales in the U.S. continue to climb steadily, as do American imports from other countries.Year of continued growth
All these signs point toward 2014 being a continued year of growth. In California, real economic growth is forecast to be over 3.4 percent in 2014, but growth is predicted at that pace or slightly higher through 2017 by the California Department of Finance for the Governor's budget.
Macroeconomists are usually concerned with three major markets: financial, labor, and goods/services markets. Financial markets are connected to labor and goods/services markets in that they are used to finance goods and services purchases.
Housing markets are where this connection is very obvious. Interest rate watching has now become a favorite pastime.
Most economists are predicting a slow and steady increase in interest rates over 2014, where the 10-year U.S. Treasury note may rise to, or close to, 4 percent.
One element of interest-rate growth is inflation expectations. The U.S. economy has yet to see much sign of rising prices that coincide with either growth or the slowing of an economic cycle.
In general, wage inflation drives general price levels higher. As wages rise, due to a labor market that has fewer workers, general prices rise as business transmit those higher wage demands to their customers through higher prices.
One side feeds the other, as more jobs are created and more wage and salary income is paid, consumers have more income to spend and can afford rising prices in the short-term.
Prices are forecast to rise slowly in 2014, keeping pace with the last three years at approximately 2 percent growth. In California, the cost of living is likely to rise a bit more quickly by 2.5 percent in 2014.
The change in leadership to Chairwoman Janet Yellen is likely to change the Federal Reserve's basic philosophy.
As unemployment continues to fall at the national level, pressure on wages to rise will generate higher inflation expectations.
Once national unemployment falls below 6.5 percent, this is one of the triggers (along with GDP and payroll employment growth) for the Federal Reserve to begin explicit increases of short-term interest rates to combat expected inflation.North Bay economy grows
Given these contexts, the outlook is good for the North Bay. Sonoma, Napa and Marin counties all have seen job growth in 2013, and continue to emerge from the 2008--2009 recession in earnest.
North Bay counties all showed signs of recovery in housing markets. However, Lake County lost some workers, versus the other counties that all gained.
Sonoma County's economy grew at 3.4 percent real growth, and generated 3,600 jobs. Housing markets provided a boost to Sonoma County homeowners and their wealth. At 21.2 percent growth from November 2012 to November 2013, this was the best year in housing markets since 2006.
Lake County saw very little price growth, though 2014 should be a better year for housing. Lake County also saw a loss of 140 jobs, about 1.1 percent of the jobs.
However, Lake County generated more income in 2013, about 4.2 percent real growth in productivity.
Mendocino County added 430 jobs, about 1.5 percent growth, while the county's economy grew about 2.8 percent. For these counties, job growth was seen in a broad mix of industries, where construction, manufacturing and services all grew in unison.
Jobs related to tourism and hospitality (hotel, restaurants, recreation in general) increased in all counties.
