Economists Report Modest Gains, Hopeful Future

As they do every year, the speakers at Thursday morning’s Santa Barbara County Economic Summit at the Granada Theatre offered disclaimers before their talks: economic forecasts are dauntingly difficult and often inaccurate. However, they said, good forecasters tend to beat a coin-flip, and the number crunching can be a useful exercise in risk evaluation.

With that “grain of salt” cautioning as their backdrop, the presenters first described the fiscal health of the nation before narrowing their focus to Santa Barbara County. Overall, they said, the outlook is good, and both the country and the county are slowly but surely climbing back from the Great Recession. Where most numbers are still below pre-2007 levels, almost all sectors are rebounding. The job market, however, continues to lag, and economists are at a loss to explain if that’s an impermanent trend or part of a larger cycle.

Peter Rupert, executive director of the UCSB Economic Forecast Project, said some of the positive changes that have taken place in recent months and years are visible throughout the South Coast. He pointed to the new Alma del Pueblo development in downtown Santa Barbara and the freshly minted Deckers campus in Goleta. Both sites were empty parking lots before they were built up, he explained.

Santa Barbara’s GDP growth is outpacing the rest of the state’s, Rupert went on, with the information technology sector growing at a remarkably fast pace. Agricultural employment never fell during the recession, and loans and leases are up from 2013. Santa Barbara’s inequality gap is smaller compared to the rest of the country, but it’s been increasing since 2006.

Those were a few of the takeaways from Rupert’s talk, which also featured more in-depth analysis of the county’s demographics, business activity, employment and income levels, and real estate trends. Below are additional key points he highlighted and provided in audience literature. (Listen to all of the presentations at econtalk.org, and visit ucsb-efp.com for more information.)

Employment

• Total employment in Santa Barbara County increased by 3,338 workers in the past year, a gain of 1.8%; total employment returned to its pre-recession level between February and March of 2013

• The unemployment rate continued to improve, with a decline of 1.19 percentage points; unemployment rates for every city in Santa Barbara remains above their pre-recession levels

• Santa Barbara’s largest industry by employment continues to be government, composing 19.75% of total employment; leisure and hospitality moved up to second largest, tying education and health services with 24,000 workers

Employment Forecast

• Total employment and the unemployment rate will continue improving over the next year, but at a slower rate

• The forecast suggests 1,274 jobs will be added and the unemployment rate will decline by 0.5% between January 2014 and January 2015

Retail Sales

• Retail sales are growing by an annual rate of 6.99%

• Furniture and home furnishings had the largest growth rate (22.9%) and electronics and appliance stores had the lowest (-2.2%)

• Goleta saw the largest growth rate among Santa Barbara County cities (6.91%), but Buellton remains the leader among per capita retail sales ($30,160)

• Retail sales in Santa Barbara and California fell more during the recession than in the rest of the United States; both Santa Barbara and California remain about 10% below their 2007 levels

South Coast Commercial Real Estate

• In dollar value, 2013 was a record year for commercial sales, but half of the volume was in hotel properties; high demand led to 45% of sales trading off-market in Santa Barbara

• More than 1 million square feet of office space was leased or renewed in 2013, a record; Goleta’s vacancy dipped below 10% and Santa Barbara’s below 5%

• Industrial space is scare as vacancy rates are at historic lows; South Coast retail vacancy dipped below 2% for the first time since 2008; Santa Barbara’s retail vacancy dipped below 2% for the first time since 2008 as available space decreased by 28%

Residential Real Estate

• House prices rose in all areas of Santa Barbara County

• The increase in house prices led to a decline in housing affordability on the South Coast

• Residential building activity declined throughout the county

Local Finance

• Net income for small regional banks has grown by 14.1 percent in the past year and 158.3 percent in the past two years

• All bank groups had increases in total assets in 2013, led by large regional banks with an increase of 14 percent

Oil and Gas

• Offshore oil and gas production continued to decline from 2011 to 2012

• Onshore oil production increased by 18 percent from 2011 to 2012 while onshore gas production remained constant

Agriculture

• The real total crop value in Santa Barbara County increased by 6 percent from 2011 to 2012

• The wine industry experience growth from last year with increases in prices (23 percent for red grapes, and 8 percent for white grapes), tons of grapes crushed, and tons of grapes produced

Demographics

• From 2012 to 2013, both net immigration and net domestic migration for Santa Barbara County were positive and contributed to over half of last year’s population increase

• The population of individuals over the age of 65 will continue to grow as baby boomers age

Homelessness

• There is a large homeless population in Santa Barbara County, and the majority have major health concerns and/or have spent time in prison

• Most homeless individuals living in the county were county residents prior to becoming homeless

•The most common reasons for homelessness are loss of job, health status, and the economy

Education

• Expenditures per student in Santa Barbara were higher than California in the last year, but both expenditures continue along a downward trend

• Performance indicators and expenditures vary significantly across districts

Crime

• There has been a long run negative trend in crime rates in the United States and Santa Barbara County

• Over the last two years, property crime rates have increased in Santa Barbara County

Environment

• Water quality at Santa Barbara County’s beaches improved over last year, while air quality remained constant

• Annual rainfall levels fell for the second straight year in the county