Experts see improved 2011 for investment; 3.5 percent GDP growth
NORTH BAY – While some dark clouds remain on the economic horizon, North Bay economists and business climate watchers are increasingly bullish about the 2011 regional forecast.
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“We are seeing real change. Things are turning around and the worst appears to be over,” said Ben Stone, executive director of the Sonoma County Economic Development Board (EDB). “While some firms are still cutting payrolls, others are hiring – not huge numbers yet and it’s not a roaring recovery – but there are fewer layoffs and rising incomes. At the same time, costs of doing business are dropping and some firms are doing better than they have in years despite Sonoma County’s 10 percent unemployment rate.”
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Christopher F. Thornberg, principal and founder of Beacon Economics, with offices in Marin County and Southern California, also foresees better times ahead as the economy starts to warm at the national level.
He sees several factors that could impact recovery: Increasing exports of technology products, cheap dollars fueling tourism, a rise in business spending, and gains in home sales – albeit at low levels. Home prices are still rising after the expiration of Federal homebuyer tax credits.
“There are a lot of green shoots springing up after a long drought and prospects for 3.5 percent GDP growth in the fourth quarter are good. Government is scaling back on spending and, if interest rates remain flat, we should see continued growth. This will drive tourism demand, a great sign for the hotel industry.”
Meanwhile, Mr. Stone sees more firms making strategic business investments and placing capital equipment orders that will position them for renewed growth.
Consumer confidence is also at a six month high, especially among those making $100,000 or more per year – the 20 percent of the population that is responsible for 40 percent of purchases and consumption.
Holiday sales this year are up approximately 5 percent and online sales increased over 15 percent.
“If the upper end of the income bracket has confidence and buys products, that will stimulate other levels that have pent up demand,” Mr. Stone said. “There is also a gradual shift downward in the amount of consumer debt, but the fact that mortgage delinquencies and foreclosures are still occurring (less than at the previous rate) says we are still not totally out of the woods. As people buy more, businesses hire more. Yet we don’t expect to see a return to full employment until 2013-‘14.”
According to Mr. Stone, companies are becoming frugal and efficient. “We are producing about as much as a nation as we did three years ago, but with eight million fewer workers. Firms are using more temporary help and part time employees while becoming more productive and innovative.”
He said in some ways, the great recession has been a “revitalizing, but harsh, tonic enabling us to become more alive, resourceful and creative.”
For example, wineries are adding second labels and tourism is up 7 to 8 percent.