Santa Barbara County:

Tourism, Retail, Ag, Cannabis and Policies to Continue Shaping Region into 2020

While Santa Barbara County’s economy is poised to continue growing into late 2020, local residential, worker, and policy issues will continue shaping the region’s livelihood—including tourism, retail, agricultural, cannabis integration, and a job market dominated by low-wage occupations.

That’s according to the annual UC Santa Barbara Economic Forecast Project for south county (“Growing a City: Accommodating Economic and Population Growth”) and north county (“Community and Current Economic Trends”). The keynote speakers’ opinions spotlight intriguing viewpoints, trends and projections so your credit union can plan appropriately.

Santa Barbara County
Presented by the UC Santa Barbara Economic Forecast Project:

  • Santa Barbara County’s “local domestic product” (similar to the national Gross Domestic Product—or GDP—economic measurement) will most likely grow well into 2020, but it’s anyone’s guess as to how fast. That’s because local GDP “has had its fair share of ups and downs in terms of real per-capita growth” over the past nine years, experiencing negative years in 2010 and 2016 and growing very slow in 2011 and 2012 (versus a very strong 6.3 percent in 2015), the forecast report states. Recently, to the north, San Luis Obispo County is “in the middle of the pack” economically speaking, while Ventura County’s economy (to the south) has been contracting due to local economic and demographic issues. In Santa Barbara County, the government sector (local, state and federal) remains the largest-producing job sector, contributing about 16 percent of the county’s GDP (and a leading employer comprising 19 percent of all local payroll workers).

  • Going forward, nonfarm payroll jobs in Santa Barbara County are expected to grow at a better rate than the past couple of years—adding 2,340 positions in 2019 (a 1.3 percent growth rate). It means that by December 2019 the county’s unemployment rate could fall to 2.8 percent and join the “very low” ranks of many counties to the north in the Bay Area (assuming local labor force growth remains at a certain minimum level—adults who make a decision to work). Additionally, total employment for all industries in the county will continue improving in 2020 and 2021 (assuming a recession doesn’t hit the economy), with average annual gains of nearly 2,500 jobs per year. Retail will experience the weakest performance, but farm employment is expected to see the largest growth assuming there’s no volatility in the broader agriculture arena.

  • Job growth has been slowing down in Santa Barbara County over the past couple of years as the current unemployment rate (3.5 percent) falls to a very low level. The county gained nearly 1,000 jobs in 2018, expanding by a small 0.5 percent over the past year. The City of Buellton has the lowest unemployment rate (2 percent) versus Santa Maria with the highest (6.1 percent). Overall, total private-industry employment (excluding public jobs) rose 14 percent from 2010 – 2017 (from 144,000 to 164,000), and total private business establishments increased 9 percent (from 13,800 to 15,000). It’s notable that the county’s total nonfarm job gains (private and public combined) over the past several years is 12 percent—much lower than California’s 20 percent growth and the United States’ 15 percent growth.

  • While Santa Barbara County’s largest five industries in 2017 were government, finance, trade, real estate and professional/business services, the fastest-growing industries were different: mining, information, wholesale trade, arts, and durable goods manufacturing. The slowest-growing (and posting negative growth rates) were non-durable goods manufacturing, agriculture, management, real estate, and administrative support. “Real GDP per capita for Santa Barbara County was $51,185. This was higher than both Ventura County ($50,806) and San Luis Obispo County ($45,907),” the forecast report states. However, the county’s real GDP per capita is lower than the United States at $55,373 (and California's at $65,160). “When comparing growth rates of real GDP per capita with other metropolitan statistical areas in the United States, Santa Barbara County falls near the middle, ranking 159 out of 384,” it adds.

  • Like many other regions, Santa Barbara County’s labor force has recently shrunk (adults who are willing and able to work). Its size decreased from September 2017 to September 2018 by nearly 1,600 workers. Yet over the past 10 years the local labor force has only declined by more than 1,900 (a very small decrease over the long-term). Even though unemployment is going down, the size of the local labor force is not growing significantly.

  • Santa Barbara County’s most volatile (or “highly seasonal”) job categories over the long-term are farm/agriculture, leisure and hospitality, government, and retail trade. From January 2009 – January 2019, the fastest employment growth happened in farm/agriculture, professional and business services, and goods-producing (manufacturing). On the low end (with some of the following experiencing negative growth) were retail trade, financial activities, “other” services, and information. In the middle were government, leisure and hospitality, education and health services, transportation/warehousing and utilities, and wholesale trade. However, the share of employment by industry has generally stayed the same over the past 20 years, with the largest increase in education and health services, but declines experienced in good-producing, retail, and financial services.

  • About 65 percent of employees in Santa Barbara County work in businesses having less than 100 workers (versus 55 percent in California). Conversely, 3 percent in the county work in firms with more than 1,000 employees (versus 14 percent in California). The City of Goleta has the largest share of employment in durable-goods manufacturing (12 percent), while Carpentaria now has the second-largest share at 8 percent. The “government” category accounts for more than 20 percent of the employment distribution in all cities (except Santa Maria and Carpinteria). All cities have a small employment share in the mining and financial service industries (between 0.05 – 2.6 percent for both). Leisure and hospitality have large employment shares in the City of Santa Barbara and the Santa Ynez Valley region (in Santa Ynez it is responsible for 22 percent of all employment). Moreover, agriculture and forestry/fishing/hunting are the largest employment-based industries in Santa Maria, with a combined 29 percent job market share.

  • The majority of jobs in Santa Barbara County only require high school education or less—and with minimal job training/experience (80,220 jobs). This group comprises 53 percent of total jobs. The second largest education group is bachelor's degree with no experience—about 23,400 workers (only 25 percent of local jobs require a bachelor's degree or more). Projections suggest this employment composition will remain constant over the next 10 years, with the majority of new jobs having minimal training/experience requirements. The largest occupation (those in farm work and nursery/greenhouse businesses) also is the lowest-paying of the top-10 largest occupations in the county (mean hourly wage of $12.12 and about $25,000 annually). Only two of the top-10 largest occupations (registered nurses and general/operations managers) have a mean annual wage above $50,000 (each with average yearly salaries above $100,000). Secretaries and assistants, a category not among the top-10 largest occupations, have the next-highest mean annual salary of $44,465. The annual mean wage in 2018 for all occupations was $55,540; and the annual hourly median wage for all was $18.97.

  • Santa Barbara County’s nonprofit sector continues to break contribution/fundraising records, surpassing $1.5 billion in 2017. Local “human service” organizations have attracted 87 percent of all contributions, with the other 13 percent of donations divided between arts/culture/humanities, education, health, and "other.”

  • The local issues faced by Santa Barbara County’s economy are more important than the national economic headwinds discussed weekly in the news media and elsewhere. “How will the retail and leisure/hospitality sectors adjust to an increasing minimum wage? There is little doubt that rising labor costs lead to a reduction in employment,” the forecast report states. “We are still seeing an elevated rate of commercial vacancies along State Street and increasing labor costs will likely be a major obstacle to filling those spaces.” Other issues are: construction labor union agreements; how the cannabis industry will impact the county as a whole (as well as agricultural output) and uncertainty in the sale of such products; and how downtown is adjusting to State Street not being the sole center of tourism focus any longer.

  • Over the past couple of years, small banks in Santa Barbara County have finally been “catching up” in the loan and net income growth that large banks have been experiencing in the region since 2010. There are 19 banks operating in the county (combined local and non-local), with more than $12 billion in deposits (total deposits increased 3.4 percent over the past year). But for the second consecutive year, loans and leases significantly trended upward for small banks while flatlining at large banks. In conjunction, net income for large banks has noticeably grown since 2010, but for small banks it just started taking off in 2017 (about 96 percent higher in 2018 than 2017). Local large banks experienced a slight dip in deposits (as a percentage of liabilities), sliding down to 69 percent at the end of 2018 compared to 70 percent in 2017. Additionally, for the first time since 2012 – 2013, both small and large banks exceeded their pre-Great Recession levels for return on assets (ROA).

  • Federal onshore and offshore oil production in Santa Barbara County (and natural gas production on federal government land as well) has noticeably trended upward over the past few years, providing a small boon to the region. This is mostly due to the U.S. presidential administration’s efforts to boost fossil fuel production, in conjunction with oil barrel prices starting to rise after hitting a low in 2016. It means total oil and gas production is recovering (increasing 40 percent and 44 percent, respectively). For context, 2017 provides a good example of state-versus-federal production differences. State oil production in the county remained at zero barrels while state gas production continued its long-term decline (falling 25 percent that year). However, oil and gas production in federal waters increased 78 percent and 80 percent, respectively—reversing the previous downward trend in federally-regulated production.

  • Santa Barbara County’s total yearly agricultural crop value hit a record $1.6 billion in 2017 (increasing 11.4 percent from the year-ago period)—boosting employment in this sector. Strawberries remain the county’s highest-grossing crop, and broccoli surpassed wine grapes to become the second-highest grossing crop that year. “A rainy winter in 2017 ended California's five-year drought, providing a boon to the county's thirsty farmers,” the forecast report states. “However, the rise of total crop value reflects fluctuating prices as much as it reflects increased output.” That year, the top-10 local crops (by value) were ranked as follows from highest to lowest: strawberries, broccoli, wine grapes, nursery products, cauliflower, head lettuce, cut flowers, celery, raspberries, and leaf lettuce. Total county agricultural jobs (about 18,250 in 2011) reached 21,630 in 2017 (but stalled from 2014 – 2016 because the water drought impacted production). Also, the average salary per agricultural worker over the long-term (2011 – 2017) has risen from $25,100 to $34,300. Fortunately, the 2019 early rain season increased water storage levels in the Gibraltar Reservoir and Cachuma Reservoir from a range of zero – 7 percent in 2016 (depending on which reservoir) to about 80 percent earlier this year.

  • The number of breweries in the City of Santa Barbara (11) has increased 38 percent over the past year (and nearly quadrupled since 2013), which is greater than California and the United States. The number of brewery employees in the city has also increased by 39 percent over the past year (and also nearly quadrupled since 2013). However, Santa Barbara County is still a “wine county” as wineries make up 87 percent of the beverage establishments compared to only 9 percent for breweries (combined total of 116 beverage establishments). Nonetheless, a major contributor to the significant total wage increase in Santa Barbara County over the long-term for all workers is the number of new breweries that are helping drive this trend, where average weekly wages at local breweries have moderately risen and held steady compared to that of San Luis Obispo County, California and the United States (all declining).

  • Santa Barbara County’s retail sales growth continued its steady climb throughout 2017 at an average growth rate of about 0.5 percent every quarter. With 20.06 percent of total taxable sales, the category of food services/drinking places remained the largest retail industry in the county. The City of Buellton had the largest one-year growth in total sales of 10.3 percent, and Carpentaria had the largest one-year decline of -7.05 percent. Out of all counties in the state, Santa Barbara County ranked 49th out of 58 in retail sales growth, which is worse than the county’s rank of 43 in 2016. Additionally, retail store permits granted (from highest amount to lowest) ranked as follows: food services and drinking places; clothing and accessories; food and beverage stores; home furnishings and appliances; building, garden and supplies; motor vehicle and parts dealers; general merchandise; gasoline stations; and "other" retail.

  • Over the past year, “core inflation” (which removes the effects of more volatile energy and food prices) increased 2.15 percent in the United States—but by 3.38 percent in the greater Los Angeles area. For the third year in a row, the Los Angeles Area CPI (consumer price index) increased by more than 2 percent, which is the Federal Reserve’s long-term inflation target. “Currently, the Taylor Rule suggests the Fed’s nominal interest rate (federal funds short-term target rate) should be approximately 4 percent,” the forecast report states. “Going forward, if the Taylor Rule is any indication, the fed-funds rate should continue to increase. However, the expected future federal funds rate is ambiguous due to Fed Chairman Jerome Powell’s recent announcement to slow down interest rate hikes.

  • Click here to view the entire forecast report and read about other local economic and demographic activity in Santa Barbara County, including: Income: household distribution, comparison to other counties, and demographic breakdown (pages 63 - 70); Residential real estate: home values, sales, affordability, inventory, condominiums versus single-family detached units, construction activity, and apartment rental dynamics (pages 71 - 84); Commercial real estate: market indicators, sales, absorption and vacancy, leasing activity, industrial conditions, office conditions, retail conditions, north versus south county, leasing summaries, and investment (pages 85 - 108); Community demographics: population growth, net migration, housing units, city breakdown, components of change, demographic detail, median age, vacancy rates, density, households by number of people, and characteristics (pages 109 - 117); Crime: property crime versus violent crime, city breakdown, and rates by city (pages 118 - 121); Education: private versus public schools, high school graduation rates, expenditures and costs, average daily attendance, performance indicators, breakdown by grade and district, testing standards, scores, and dropout rates (pages 122 - 129); Environment: energy usage, water reservoir levels, annual rainfall, ozone exceedance, drought, water consumption, air quality, and electricity consumption (pages 130 - 135).

  • Click here for the forecast conference slide presentation delivered by keynote speaker Peter Rupert (executive director of the annual project). Issues discussed include the global economic outlook; U.S. economic fundamentals and trends; economic recovery versus recession; local real estate trends; local demographics and population trends; aspects of the Federal Reserve within the current monetary, inflation, and economic environment; California state pension liabilities; cannabis industry activity and tax revenue; minimum wage issues; and nonprofit sector/contribution breakdown.

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: Santa Barbara County 

  • Total population: 453,000 (and will hit 476,000 by 2025).
  • Working-age individuals (16 - 65 years old): 67 percent of total population in 2015 (and will fall to 64 percent by 2025).
  • Labor force (at least 16 years old who are working/looking for a job): 225,000 out of 363,000 adult population.
  • Labor force participation rate (adults who “want” to work): 62 percent (or 225,000 individuals).
  • Unemployment rate: 3.5 percent (versus 3.9 in CA and 3.6 in U.S.)
  • Unemployed workers: 7,600.
  • Median household income: $71,100 as of 2018 (compared to $68,000 for CA and $59,000 for U.S.)'
  • Poverty rate: 15.4 percent (versus 14 in CA and 14 in U.S.)
  • Education of population (age 25 years or older): 32 percent have a college degree; 30 percent some college; 18 percent high school diploma; and 20 percent no high school diploma.
  • Employment sector growth: click here for a local future growth breakdown (2014 – 2024) of nonfarm job projections by industry, occupation, education, and fastest-versus-largest areas of importance in Santa Barbara 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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