Sonoma County economy poised to recover faster than California: UCLA Anderson Forecast economist
With a cautious yet upbeat view of the region’s future, Jerry Nickelsburg, director and senior economist at UCLA Anderson Forecast, said Sonoma County is poised to recover faster than California.
“It’s all about the pandemic…. (R)ecovery starts when the pandemic stops,” he said in the keynote talk at the Sonoma County Economic Development Board’s virtual 2021 Economic Perspective on Thursday.
Key to recovery is restoration of job losses, especially those who work with the public. Nearly 90% of county job losses have been in that area, he said. Of those, about 35% have been in the leisure, beverage and hospitality sector; 26% in government; 13% in retail; 8% in education and health care, with day care and child care in a severe retrenchment; and 7% in other service categories.
“The Sonoma County economy depends on people getting together for wine tastings, tours, and dining,” Nickelburg said. “People need to feel safe to gradually build confidence to come back. We have to get to the other side of this crisis. The hospitality industry should rebound rapidly, and its problems could soon be in the rear mirror.”
How the recession continues to affect public travel shows in figures from the Sonoma County’s air hub.
Passenger arrivals at Charles M. Schulz–Sonoma County Airport plummeted to 19,303 passengers in at the end of 2020 from 488,179 in December 2019, a decline of 60%. International arrivals at San Francisco and Los Angeles international airport have dropped to near zero levels in response to regulatory shutdowns. In 2019, about 1.5 million tourists came from China alone to the U.S. He said airport arrival losses are concurrent with job losses.
“We expect an increase in domestic tourism to offset losses in international tourism in Sonoma County as people take a wait-and-see attitude based on concerns for personal safety or develop a higher risk tolerance for going out to beaches, hiking in the mountains, etc.,” he said.
Cure unemployment with vaccines
Sonoma County is on par with the U.S. with 6.5% unemployment, lower than Napa’s 7.2% and California’s overall 9% rate, according to December unadjusted data Nickelburg cited from NPI.
California’s unemployment rate, according to the California Employment Development Department, was at a record low 4% in September 2019, down from a high of 12.2% in 2010, he noted. In 2020, statewide in California, nonfarm payroll jobs declined by 1.4 million from a previous high of 17.6 million nonfarm jobs, but by yearend rebounded to approximately 16.2 million.
The U.S. unemployment rate average by state, based on October 2020 numbers, is approximately 6.7%.
“The remedy to deflate high unemployment is vaccine needles in arms,” Nickelburg said.
Government outlook
State general fund revenues are increasing over those of past years, and Sacramento has an $18 billion rainy-day fund. But Nickelburg said state and local governments in fiscal year 2020 and 2021 will see budget contractions without significant aid from Washington to help their offset pandemic-related expenditures.
However, the Biden administration has included more aid to states in plans for the next congressional relief package. California counties still rely on property and transient occupancy taxes among other sources of income, Nickelburg said.
Financial markets are up
The nation is experiencing a dramatic stock market rise, according to Nickelsburg. The S&P 500 index, for example, is all about technology, liquidity and optimism about hopeful future prospects for the economy, he said. The S&P Market Cap level in December was $31.66 trillion, up from $30.01 trillion a month earlier and $26.76 trillion a year ago, according to S&P Global. This represents a change of 5.49% from the last month and $18.31% from one year ago.
He predicted personal income will expand 5% to 9% between 2021 and 2022 as employment growth increases by 4% to 6% in the same period.
Home sales bounce back
Existing homes sales have been soaring higher since August 2020’s low point of some 195,788 units increasing to 509,750 in December, according to California Association of Realtors data Nickelburg cited. During the same period the median price for a home in San Francisco rose from $575,160 to $717,930 or more.
New residential building permits in the state are forecast to pass 2020’s level by 2022, he said. This will lead to a rise in home construction, based on a three-month moving average. It would be the most housing permit application activity since 2019, based on U.S. Census Bureau data and UCLA Anderson Forecast analysis.
