Monterey-Santa Cruz Counties

Economy, Jobs and Wages Grow, but Housing, Poverty and Issues also Rise

The Monterey Bay-Santa Cruz Region, similar to other coastal regions, is saddled with economic issues even as its economy, job base, and business activity are projected to continue growing in line with the broader economy well into 2020.

That’s according to the 5th annual Regional Economic Summit hosted by the Monterey Bay Economic Partnership. The keynote speakers’ opinions spotlight intriguing viewpoints, trends and projections so your credit union can plan appropriately.

Monterey Bay and Santa Cruz Region

Presented by the Monterey Bay Economic Partnership (click here for her slide presentation):

  • Local job growth is impressive and rising wages have finally taken hold for several quarters, but that’s only half of the picture. Local economic growth has been met with skyrocketing housing inflation, growing wealth inequality, slightly higher poverty, and other socio-economic patterns that local business and government leaders are discussing and trying to reconcile.

  • The most recent economic expansion (2010 – present) has ushered the Monterey Bay and Santa Cruz Region into a strong job-producing period—especially from 2012 onward. Combined average-annual total job growth in the counties of Monterey, Santa Cruz and San Benito was approximately 6,800 positions from 2012 – 2018 versus a more tepid 1,600 from 2003 – 2007 (the last economic growth period). During the Great Recession and afterward (2008 – 2011), the region lost an average 3,200 jobs per year.

  • The combined unemployment rate in the three-county region has dropped to 6.5 percent (Monterey, Santa Cruz, and San Benito counties)—still significantly higher than the state and nation. Local unemployment rates in Monterey, Santa Cruz, and San Benito counties fell from the 12 – 15 percent range in 2010 to 5.9, 5.7, and 7.2 percent (respectively) by 2017. Since then, Monterey County has risen back to 7 percent (possibly due to more individuals entering the labor force because of a “hot” job market)—but unemployment rates have dropped in Santa Cruz County and San Benito County to 5.5 and 5.3 percent. These individual unemployment rates are considered almost “normal” by economists’ standards, but they stand in contrast to 3.9 percent for California and 3.6 percent for the United States.

  • The annual median household income has risen 7, 13 and 23 percent in the counties of Monterey, Santa Cruz, and San Benito (respectively) from 2010 – 2017. From former to latter, they are now $63,250, $73,660, and $80,760. (For context, California’s rose 10 percent from $60,880 to $67,170).

  • Even with local job growth continuing to show strong momentum, a greater number of families in the counties of Monterey and Santa Cruz have fallen below the poverty line. In Monterey, that share has increased from 10.6 – 11.1 percent from 2010 – 2017; and from 7.7 – 8.4 percent in Santa Cruz during the same period. (The combined three-county Monterey Bay Region rose from 9.4 – 9.8 percent, while California has gone from 10.2 – 11.1 percent) Additionally, more households in the combined three-county region were receiving federal government food stamps (7 percent in 2017 versus 5 percent in 2010—and in California 9 percent versus 5.4 percent).

  • The cost of living continues to outpace local household income in the greater Monterey Bay and Santa Cruz Region. The annual median household income in the counties of Monterey and Santa Cruz were significantly lower than median household expenses in 2018 by a negative gap of $13,000 (also known as “local affordability”). This isn’t the best comparison, but it still shows this negative gap has widened since 2011 when it was much lower (about $4,000 - $6,000). The only area where median cost-of-living expenses are on par with median household income today is San Benito County (a region where there was a positive gap of $12,000 back in 2011, but no positive gap today as it has disappeared with the general trends in the broader region).

  • Only 12 percent of families earning the local annual median household income in the Santa Cruz-Watsonville metropolitan area can afford to purchase a local home (“local affordability”). This number was 20 percent in 2008. For Salinas, it’s 11 percent today versus 26 percent in 2008. Meanwhile, the median monthly rental housing cost in Santa Cruz County is $3,070 and has flatlined at this approximate level since 2016; it is $2,550 in Monterey County (nearly the same as California); and $2,390 in San Benito County. Also, 58 percent of families/individuals rented in 2017 compared to 55 percent in 2010 due to entrance into the renter’s market within the counties of Monterey and Santa Cruz (although this percentage noticeably dropped in San Benito County).

  • The Monterey Bay and Santa Cruz Region’s housing production (inventory growth of for-sale units) is not keeping pace with local population growth. For example, population growth in Monterey County has averaged 3,700 per year from 2008 – 2017 while annual housing units constructed only averaged 250. Depending on the area, each county within the three-county greater bay area has accomplished 25 – 39 percent of achieving its Regional Housing Needs Allocation (RHNA) goal for 2014 – 2023, as established by a local housing council. Monterey County will need nearly 7,400 units built, but only had 1,880 as of 2018. Meanwhile the counties of Santa Cruz and San Benito each respectively need 3,050 and 2,200 units but only had 800 and 850.

  • Four possible economic directions have been pinpointed for the Monterey Bay and Santa Cruz Region’s future over the next 50 years (2020 – 2070). The fist scenario, and most “hoped for,” is the area experiences increasing prosperity that is widely shared among residents as it becomes an engine for upward economic mobility. The second is: Economic growth continually slows, so local policies focus on redistributing existing wealth and over the long-term prosperity still declines. The third: Current economic trends continue as the “knowledge economy” provides a strong local dynamic—however, many residents are shut out from the resulting prosperity. And fourth: The region’s leading industries see slower growth and companies shrink; innovation shifts to other regions of the state; and as there are fewer opportunities for everyone, poverty increases.

  • Five questions discussed at the conference included: 1) Will we change our zoning and planning processes to facilitate large-scale increases to the region’s housing supply? 2) Will we be willing to replace single-family homes with multi-unit housing in some parts of the region? 3) Will we reform the property tax system so that cities have stronger fiscal incentives to permit housing development? 4) What level of funding will we provide for social housing? 5) Will we locate more employment and homes near transit and in other places where commuters can access jobs without driving?

  • Click here to view a video of the conference’s keynote speaker presentation (Bruce Katz, co-founder of New Localism Advisors and former Brooking Institution scholar and executive). In “New Localism—a Governing Philosophy and Practice for the 21st Century,” Katz relates the Monterey Bay and Santa Cruz Region’s challenges to other localities across the globe due to “vast economic restructuring” and the interplay between government, businesses, cities and rural areas. He discusses the region’s current opportunity as a “critical moment to take responsibility for its future by working to drive the future from the bottom up.” Katz takes a look at economic insecurity, cultural anxiety, the pace of economic disruption, and how centers of global competition have stirred innovation, maturity, exchange of ideas, incubation, and acceleration due to their density, co-location and concentration. However, these have come with a trade-off for rural areas and smaller communities that are now seeking to reinvent their cores.

  • Click here to view a video of the conference’s CEO panel discussion. Four leaders discuss challenges and opportunities for the local region, including Lenny Mendonca, chief economic and business advisor for California Gov. Gavin Newsom; Carrie Birkhofer, CEO Bay Federal Credit Union; Joe Burton, CEO of Polycom and Plantronics; and Bruce Taylor, CEO of Taylor Farms.

Local County-Level Perspectives

The California Department of Transportation (Caltrans) has released its 2018 – 2050 demographic forecast for all counties in California regarding local jobs, wages, home prices, population, personal income, taxable sales, net migration, wildfire issues, public policy implications, legal cannabis, industries, workforce, and more.

For forecasting purposes, the shorter-term economic projections for 2018 – 2023 within this county-wide report by Caltrans do not factor in an economic recession into its local scenarios. They are only highlights stemming from a baseline projection (view the report above for more information).

Demographic Profile and Projections: Counties of Monterey/Santa Cruz

  • Total population: 710,000 (and will hit 769,000 by 2025).
  • Working-age individuals (15 - 64 years old): 67 percent of total population in 2015 (and will fall to 63 percent by 2025).
  • Labor force (at least 16 years old who are working/looking for a job): 375,000 out of 555,000 adult population.
  • Labor force participation rate (adults who “want” to work): 67 percent (or 375,000 individuals).
  • Unemployment rate: 6 percent (versus 3.9 in CA and 3.6 in U.S.)
  • Unemployed workers: 24,000.
  • Median household income: $73,000 as of 2018 (compared to $68,000 for CA and $59,000 for U.S.)
  • Poverty rate: 14.7 percent (versus 14 in CA and 14 in U.S.)
  • Education of population: 31 percent have a college degree; 30 percent some college; 20 percent high school diploma; and 19 percent no high school diploma.
  • Employment sector growth: click the following links for local future growth breakdowns (2014 – 2024) of nonfarm job projections by industry, occupation, education, and fastest-versus-largest areas of importanceMonterey County and Santa Cruz County.
  • * Data as of April 2019 from the California Center for Jobs and the Economy; California Employment Development Department; California Department of Finance; Federal Reserve Bank of St. Louis; U.S. Bureau of Economic Analysis; and U.S. Census Bureau

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