Local Demographics Reveal Long-Term Change in CA and NV

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The share of high-tech jobs out of all jobs created in the Bay Area over the past eight years was 37 percent. The anticipated increase in the median price of an Inland Empire home in 2018 is 6.5 percent—hitting $360,000.

And believe it or not, the gaming industry’s piece of total economic activity in the Reno-Sparks region is a mere 4 percent today versus 25 percent in the mid-2000s.

By the end of February 2018, California and Nevada will have experienced nearly 10 regional economic forecasts so far this year—along with a slew of demographic numbers to help local business and political leaders get a grasp on where their communities have come from and where they’re headed.

What’s Really Happening
Some cities and towns across both states will increase in population over the next few years, but not by much. Others will remain steady or may even drop. Even though the total population in both states will rise, a broad-based slowdown in natural births and foreign immigration is already making its mark. So will an aging workforce—a decline of individuals in their prime working years.

One particular fact that stands out: a miniature “migration” is taking place among some Californians to other states (particularly Nevada) as people seek cheaper housing and decent jobs in communities they never thought could offer these combined opportunities.

“California’s population dynamics and fear of flight over high prices and taxes is not new. The biggest issue is, we are at a tipping point due to a perfect storm of new tax laws that will hurt the state more than others,” said Rob Eyler, economics professor at Sonoma State University and board member of Redwood CU. “Nevada is right next door with no state income tax. And the Reno-Sparks and Las Vegas regions are slowly transforming into more dynamic economies, although their local housing prices are also rising and working against local wages.”

An aging population has been transforming California’s economy for decades, but the rate of change may quicken over the next 5 – 10 years, with one exception. This caveat is the nature of the state’s economy—the entertainment, high-tech and bio-tech capital of the nation, if not the world. It’s a huge asset in drawing a diverse and educated workforce, which can come with wealth and high wages.

“Both wealth and income inequality are still concerns, but my main concern is that the taxes to live in California will rise as a way to redistribute income, which will quicken the flight of those considering leaving,” Eyler said. “These changes won’t effect home prices in the long-term as much as they will labor market composition. I’ve been talking for years how California is possibly going to turn into the world’s largest high net-worth community by 2050 that’s partially serviced by workers remotely who live on the fringes of the state—or even out of state.”

Your Local Economy: 2018 - 2021
Depending on which economic forecast you review, California’s economy will “absolutely” grow in 2018 as the United States posts somewhere between 2.5 and 3 percent national Gross Domestic Product (the most traditional measurement of consumer livelihood and business activity).

In 2019 there’s a “good chance” it will continue growing, these forecasts say. And a few bold economists are even projecting continued-but-slow growth into 2020 and 2021.

But like many cycles of the past, others argue an economic recession looms sometime within the next 12 – 24 months. In the world of forecasting, nothing is that simple when economic forces are not under the control of a software model or presumptions based on history.

“The new tax laws and possible infrastructure and immigration reform coming out of Washington, D.C. could easily lead to inflation and then to interest rate hikes and truncate the economic cycle,” Eyler said. “The average of all the professional forecasts are still bullish from now to 2020. But if wages begin to rise along with commodity prices in 2018, we may see interest rates rise in a way that early 2020 is the beginning of the end of this cycle—and then maybe a mild recession.”

Credit union leaders can form their own opinions as they read the following viewpoints, demographic trends and projections to plan for the year ahead:

Mark Your Calendars
Join your peers for the following upcoming events:

  • The "Tax Reform's Impact on Member Behavior" webinar on Feb. 22 (from 1:30 – 3 p.m. Pacific), featuring Dr. Rob Eyler—board chairman of Redwood CU and economics professor at Sonoma State University. Personal taxes, corporate taxes, real estate, and homes/commercial taxes have all been affected in different ways by recent changes in the federal tax code. How credit union members react to these changes affects credit unions' ability to manage change.
  • The California and Nevada Credit Union Leagues' 3rd annual “Your Economy—Your Credit Union” forum is coming in June! For questions, email Matt Wrye.

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