Central Coast:

Central Coast Economy to Grow, Even as Land-Use, Housing and Job Issues Peak

The Central Coast’s housing unaffordability, land-use policies and labor market issues continue hampering many households’ ability to thrive even as the five-county region’s economy is poised to keep growing in 2020 — although Ventura is the exception to this growth projection.

That’s according to the most recent forecasts published by the Central Coast Economic Forecast and California Lutheran University in November. The keynote speakers’ opinions spotlight intriguing viewpoints, trends and projections so your credit union can plan appropriately.

Central Coast Economic Forecast (local annual initiative)
Presented on Nov. 8 by Beacon Economics:

The Central Coast region’s economy is poised to continue growing in tow with the entire state throughout 2020, but it continues facing unique housing and labor market issues that hamper locals’ ability to thrive. From Ventura in the south to Monterey in the north, the area continues to be driven by a unique economy based on tourism, leisure/hospitality and seasonal agriculture, among other industry sectors. However, the state’s broader problem of housing stock and affordability is particularly hitting Central Coast workers and households hard. For the most part, jobs remain in plenty. However, creating higher-paying jobs and lower-cost housing is having its affect.

For the latest local trends on the Central Coast economy: click here to access the forecast conference presenter’s slide presentation on trends in Santa Barbara, San Luis Obispo, Monterey, and Santa Cruz (pages 14, 16, 20, and 22 – 49). Trends include data on health care; household earnings and income industry breakdown; business activity and airport growth; labor market, employment, venture capital and business formation; education, earnings, population and growth slowdown; home affordability, rents, vacancies and sales; housing stock, residential permits, construction and commercial permits; and industrial, workforce and environmental tools.

California Lutheran University
Presented on Nov. 14 by the Center for Economic Research and Forecasting:

Ventura County’s economy will grow by just fractions of a percent (only 0.1 – 0.2 percent) in 2020 and 2021 as it remains in a prolonged period of weakness. Like past recent years, the local economy is increasingly driven by worsening negative net domestic migration (a contraction in people moving in the area, which impacts local labor force levels). Additionally, the county’s population will continue to shrink. This erosion is a local phenomenon that started five years ago due to high housing costs and low local birth/fertility rates. Average economic growth (“local GDP—Growth Domestic Product) was 0 percent from 2014 – 2018.

Ventura County’s latest sign of weakness arrived in the form of population data. The county’s population declined over the course of 2018 for the first time in the history for which data is available. “Poor housing affordability is driving jobs and individuals away from the region, increasing net domestic out-migration and decreasing total economic activity,” the forecast report states.

Ventura County’s housing market is “clearly faltering,” the forecast report states. Home price growth has slowed significantly, with street price growth averaging 0.8 percent for the past 11 months. The six-month moving average of price growth has been falling “secularly” for the same 11 months and was essentially zero for September 2019. In 19 of the past 36 months, sales growth has been negative. 2018 was a disappointing year for Ventura County homebuilding, with only 1,229 units permitted. The 2018 permit rate fell 47 percent from the 2017 permit rate of 2,326 units. “Even 2017’s number was anemic by historic standards,” it states. “Our forecast calls for a small improvement to existing home price growth. However, the forecast is consistent with a market that is anemic, with slow price growth, weak sales, and low rates of building activity.”

If the current forecast holds, Ventura County will have experienced 8 years during which average economic growth is indistinguishable from zero. “Eight years of 0 percent economic growth is truly stunning considering the strong economic legacy of Ventura County,” the forecast report states. “It is the same county that gave birth to Amgen, the world’s largest independent biotechnology company. It is the county which is still home to Naval Base Ventura County and the Port of Hueneme, and which boasts some of the most valuable agricultural land in the United States if not the world. It will forego nearly a decade of economic growth and the considerable social and environmental benefits that flow from it.”

A return to robust economic growth in Ventura County will require “fundamental changes to the policies which drive the current weakness,” the forecast report states. “This must necessarily start with a determined effort to build more housing. Our advice to residents, business leaders, elected officials and policy makers is simple. Don’t wait any longer. If the current cohort of leaders refuses to heed the economic warning signs, they will preside over an entirely preventable economic malaise.”

Population decline in Ventura County is not an early warning sign. Early signs began appearing six years ago. Population decline is a late-stage manifestation of significant economic weakness. As individuals and households have compared the economic opportunity that is available to them in Ventura County to opportunity available in other parts of the country, more and more have left to seek that opportunity. “In 2018, 4,000 more people left Ventura County for another region of the country than came to Ventura County from another region,” the forecast report states. “Accelerating net domestic out-migration has finally overwhelmed natural population growth and positive net international migration, tipping overall population growth negative.”

Natural disasters have also contributed to Ventura County’s current situation. The Thomas Fire, which burned more than 1,000 homes locally, was followed by the devastating Hill Fire and Woolsey Fire less than a year later. Not surprisingly, the decline of the county’s overall population was driven by declines in Ventura and Thousand Oaks, the two cities most impacted by these fires. These fires have had a serious impact. “Strong economies can absorb unexpected shocks,” the forecast report states. “Weak economies unfortunately cannot.” With the start of the 2019 fire season, the county has weathered a third consecutive year of destructive wildfires (Easy Fire and Maria Fire).

The Ventura County jobs market also paints a picture of general economic shortcomings. With a few welcome year-over-year exceptions, jobs in high-paying, high-output per worker sectors are in a sustained decline. Jobs in low-paying, low-output sectors are growing. Despite strength in 2018, the number of jobs in durable goods manufacturing is still down nearly 20 percent from the pre-Great Recession era number of positions (pre-2007 - 2009). Non-durable goods manufacturing and financial activities, two of the sectors with the highest average salaries, are down more than 27 percent as well. Information and technology is down 14 percent from the previous high.

Educational/health services and leisure/hospitality, two sectors with low average salaries, are each up significantly since the Great Recession (2007 – 2009). “Unfortunately, jobs in these sectors often do not pay wages which are sufficient for workers in these sectors to be able to afford to live in Ventura County,” the forecast report states. “This, along with the widespread loss of high-paying jobs, has created a major dislocation between homes and places of work. More than 80,000 Ventura County residents leave the county each day to work in a job that allows them to afford to live in Ventura County. Meanwhile, 40,000 employees drive into the county each day to work in jobs that largely do not pay enough to live there.”

When you add home price growth to the list of economic variables already discussed, an economic puzzle emerges in Ventura County. The size of the county’s labor force has shrunk; total economic activity has declined; jobs are being lost in high paying sectors and added in low paying sectors; and the population is now declining. However, home prices continue to rise. “It points to the fact that causality flows from poor housing affordability to poor regional economic performance, not the other way around,” the forecast report states. “It simply can’t be the case that a fundamentally weak economy is causing home prices to soar. Instead, poor housing affordability is driving jobs and individuals from the region, increasing net domestic out-migration and decreasing total economic activity.”

Get the full report. Email Karin Grennan to purchase the full research package for more trends on Ventura County’s industries, occupations, demographics, education, income, poverty, economic indicators, labor market dynamics, migration, and population.

USC
Presented on Oct. 25 by the Lusk Center for Real Estate:

Over the next two years (2020 – 2021), monthly housing rents will increase over their 2019 levels by $110 in Ventura County. Being the entire region’s slowest-growing county, Ventura County produced one of the biggest surprises of this year’s forecast with a 50-percent increase in multifamily construction permits. With much of its housing stock tied up as second homes or units reserved for seasonal use, rents will continue to increase as vacancy rates decline.

Ventura County’s current and future rental market analysis and forecast is as follows: 2019: $1,970 average rent and a 3.4 percent vacancy rate. 2021 forecast: $2,080 average rent and a 2.7 percent vacancy rate.

The following materials shed more light on Ventura County and other counties: For the 2019 multi-family real estate/rental forecast report, click here. For the forecast event’s slide presentations, click here.

Local County-Level Perspectives
The California Department of Transportation (Caltrans) will soon release its updated 2019 – 2050 demographic forecast sometime in late 2019 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 2019 – 2024 within this annual 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).

Central Coast Occupational/Industry Trends
Additionally, download Chmura Economics and Analytics’ latest Central Coast Economic Overview to see 10-year future trends in worker occupations, employment, wages, cost of living, and industries.

Demographic Profile and Projections: Central Coast*

  • *(Combined counties of Santa Barbara, San Luis Obispo, and Monterey)
  • Total population: 1.16 million (and will hit 1.24 million by 2025).
  • Working-age individuals (15 - 64 years old): 68 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): 585,000 out of 910,000 adult population.
  • Labor force participation rate (adults who “want” to work): 64 percent (or 585,000 individuals).
  • Unemployment rate: 2.7 percent in three-county region (versus 3.9 in CA and 3.6 in U.S.)
  • Unemployed workers: 17,100.
  • Median household income: $71,600 as of 2018 (compared to $71,800 for CA and $60,400 for U.S.)
  • Poverty rate: 15 percent (versus 14.3 in CA and 14 in U.S.)
  • Education of population: 28 percent have a college degree; 31 percent some college; 24 percent high school diploma; and 17 percent no high school diploma.
  • Employment sector growth: click the following web links for local future growth breakdowns (2014 – 2024) of nonfarm job projections by industry, occupation, education, and fastest-versus-largest areas of importance: Santa Barbara County, San Luis Obispo County, and Monterey County.
  • * Data as of October 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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