Economist Robert Eyler, Ph.D., sees the North Bay as having good fundamentals and a few uncertainties during post-fire recovery, but he does not anticipate a local recession before 2020, or one prior to a national economic downturn.
“Overall, the economy is in good shape with positive fundamentals in place. Tax and job reforms should provide a short-term boost without shrinking the economy or posing a long-term threat until possibly 2025 or later,” said Eyler, professor of economics, senior international officer and dean of the Sonoma State University School of Extended and International Education.
Eyler will present his assessment of themes impacting local, state, national and global economies on March 2 at the Business Journal’s Economic Outlook Conference at the Doubletree Hotel in Rohnert Park.
FIRE-RELATED UNEMPLOYMENT FIZZLES
Eyler believes technology companies should keep the economy stable, enabling California to grow faster than the U.S. — with the North Bay helping to feed this broader expansion cycle two to three years from now as ramped up rebuilding efforts gain momentum.
He said real gross domestic product (GDP) projections for the state are trending higher now than they were before 2018 and are predicted to reach 2.8 percent this year. Unemployment rates are lower than expected, as shown in median forecasts for selected variables based on current and previous surveys.
The exception was unemployment insurance claims that spiked in fire-impacted areas in the fourth quarter of 2017. Claims in Sonoma County more than doubled those reported in the 2002 index year and in Napa County by one and a half times the index. Claims dropped back almost to or below prefire levels by January of this year.
In Lake County, two unemployment-claims bumps were seen due to massive wildfires, in 2015 and 2017.
At the same time, payrolls — in terms of total dollar amounts per month — are also seen as moving higher this year than previous estimates indicated.
“While the fires were certainly catastrophic for those affected in four counties, they were not as damaging to the overall economy as some might think — even with a loss of possibly $12 billion worth of housing and commercial real estate stock and insurance claims rising to match,” Eyler said. “I believe insurance underwriters are going to have to find creative ways to fill gaps between existing coverage and the total cost of home replacement or risk a loss of public relations and suffer brand damage.”
WHAT MAY HAPPEN IF MANY DON’T REBUILD
A critical question is, how will the region rebuild, he said. Will it be through the provision of more housing units, by building more junior accessory dwellings or by emphasizing multifamily rebuilds over single-family homes? In the final analysis, will we have more or fewer units than before?
The trend among California agencies granting housing permits has favored multifamily units over single-family homes by a ratio of 2 to 1 since the end of the Great Recession in 2010.
At his March 2 presentation, Eyler said he also plans to address value-added economic benefits to be derived from rebuilding in terms of jobs supported, additional revenue from local vendors to construction firms, worker and business spending, as well as state and local taxes.
Eyler will show examples of the potential negative impact on the economy if all the affected households in Sonoma County (17,266) and Napa County (4,200) did not rebuild and opted to leave the North Bay.