Greater Sacramento Region:

In Slowing Economy, Lack of Workforce and Skills Haunts Employers

2020 will be another healthy year for the Greater Sacramento regional economy, although growth will slow down compared to the past few years. One of the biggest challenges is the lack of workers and “skills gap” that many local employers continue citing.

That’s according to the most recent forecast presented and co-hosted by the Sacramento Business Review, Sacramento Business Journal, Cal State Sacramento, and the Greater Sacramento Economic Council. The keynote speakers’ opinions spotlight intriguing viewpoints, trends and projections so your credit union can plan appropriately.

Greater Sacramento Region
Presented on Jan. 14 during the “2020 Economic Forecast”:

The Greater Sacramento region’s economy is expected to remain “healthy” in 2020. Recently, the local unemployment rate touched an all-time low of 3 percent (although the labor force declined by 20,000 in the first half of 2019 and the local rate of employment growth has slowed dramatically over the past six months). Construction, manufacturing and health care have been largest sectors for job growth over the past 12 months.

The Greater Sacramento region’s consumer sentiment is at its highest level since the inception of the SBR/SAFE Credit Union Consumer Sentiment Survey. Significant increases in consumer sentiment were observed over the past year at the regional level. Consumer sentiment is highly correlated with household income. Respondents with higher household income reported significantly higher consumer sentiment when compared with respondents at lower household income levels. Types of local credit “held” by consumers remains fairly constant, with a slight rebound in plans to acquire mortgages, auto loans, and credit cards.

Sacramento County’s Small Business Administration (SBA) lending activity in 2019 was good, but loan approvals fell below the two-year moving average (primarily due to a slowdown in certain areas of Sacramento County). Overall business sentiment is optimistic across the different sectors surveyed. There is an expectation for continued growth, albeit at a slower pace. Business transaction activity measured by volume of listing and closed sales continues to show positive year-over-year growth. However, excluding a “tough” fourth-quarter 2018, the most recent transactions are on smaller deals with lower valuations relative to prior years.

The Greater Sacramento region’s real estate market is signaling different dynamics depending on the sector. Annualized single-family residential/home price growth has slowed since 2018, increasing by only 3.5 percent year-over-year (likely due to the increase of new construction throughout the region). In the office market, the vacancy rate continues to hit an all-time low, with the market experiencing very few large blocks of space and little speculative construction on the horizon. In the industrial market, lease rates have stabilized, and the market is finding its new low vacancy equilibrium (although rates remain below replacement cost for all product except high-cube distribution centers like those being built at Metro Air Park). In the retail market, fundamentals continue to be driven by construction — and class-A centers are seeing strong demand due to strong demographics. Retail-market tenants continue looking to add experiential elements resulting in food halls, virtual reality arcades and the like.

Greater Sacramento-area credit unions and banks had a “great year” in 2019 from an income perspective, but 2020 looks to be much more challenging with slowing loan growth and buoyant funding costs. The Federal Reserve did an about-face in 2019, easing on short-term interest rates with three cuts and aggressively stepping into short-term funding markets to keep the liquidity flowing. “Monetary policy makes us think the Fed got it right and plans to hold the line on rates in 2020,” the forecast report states. Although U.S. economic performance left a lot to be desired in 2019, U.S. equities soared with a return of almost 30 percent for the year. “With such a lofty starting point, emerging markets and other developed market equities appear to be the better play in 2020,” it states.

The Greater Sacramento regional workforce skills gap is at its widest margin since 2017, with voluntary employee turnover expected to increase even more. Cost reduction, managing persistent talent shortages, and the skills gap is expected to have the most significant impact on local organizations. Improving employee engagement, talent development, and succession planning are top priorities for local human resources managers in 2020. However, artificial intelligence ranks toward the bottom in the Sacramento region.

Access the entire forecast report — Learn more about the following Greater Sacramento regional trends within the "January 2020 Sacramento Business Review: Rising Into the Next Decade" report: labor markets and regional economy (pages 10 - 13); consumer sentiment survey (pages 14 – 17); the small business economy (pages 18 – 21); real estate (pages 22 – 25); capital markets and banking forecast (pages 26 – 31); and human capital trends (pages 32 – 35).

Sacramento Workforce Public Opinion Report
Valley Vision and Cal State Sacramento's Institute for Social Research has released "The Workforce and Education Poll Series: The Future of Work in the Capital Region" report, showing local public opinion and trends regarding technology disruption, the gig economy, experiences at work, values toward work, experiences of discrimination, and aspirations for the future.

Local Home Affordability Vs. Job Growth
The National Association of Realtors recently released a study (“Home Affordability Index Ranking and Payroll Job Growth") showing trends in how local housing affordability can contribute to slower local job growth by employers. View the data table for local metropolitan information in California and Nevada.

Local County-Level Perspectives
The California Department of Transportation (Caltrans) has released 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).

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

Your Local Region’s GDP: 2001 - 2018
The U.S. Bureau of Economic Analysis has released an overview and history on "Local Area Gross Domestic Product from 2001 - 2018" for individual counties in California, Nevada and the entire nation. It includes highlights and trend breakdowns for large, medium and small-population size counties, as well as the U.S. dollar size of economies for each county. Tables and files are included for download and review.

Latest CA Population and Demographic Trends
The California Department of Finance has released its latest news — "State's Population Increases by 141,300 While Rate of Growth Continues to Decline" regarding 2018 to 2019 population growth, which includes highlights and snapshot trends of each county and region across the state. (You can also download the long-term 2010 to 2019 demographic tables by clicking here)

Also, the department's deeper demographic breakdown (age, race, income, employment, poverty, health care, education, and social/housing characteristics), courtesy of the American Community Survey by the U.S. Census Bureau, can be found by clicking here.

County Income and Poverty Estimates
The U.S. Census Bureau has released its "Small Area Income and Poverty Estimates (SAIPE) Program", which gives single-year estimates of income and poverty for all counties in California, Nevada and the entire nation — as well as estimates of school-age children in poverty for all 13,000-plus school districts.

Demographic Profile and Projections: Sacramento County*

  • Total population: 1.5 million (and will hit 1.67 million by 2025).
  • Working-age individuals (15 - 64 years old): 67 percent of total population in 2015 (and will fall to 65 percent by 2025).
  • Labor force (at least 16 years old who are working/looking for a job): 704,000 out of 1.17 million adult population.
  • Labor force participation rate (adults who “want” to work): 60 percent (or 704,000 individuals).
  • Unemployment rate: 3.2 percent (versus 3.9 in CA and 3.5 in U.S.)
  • Unemployed workers: 23,100.
  • Median household income: $69,800 as of 2019 (compared to $71,800 for CA and $60,400 for U.S.)
  • Poverty rate: 17 percent (versus 15 in CA and 13 in U.S.)
  • Education of population: 19 percent have a college degree; 38 percent some college; 28 percent high school diploma; and 15 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 importance: Butte County-Chico region; Glenn-Colusa-Tehama region; and Shasta County.
  • * Data as of January 2020 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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