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Report: Stubborn problems persist

Economy: SCV Economic Development Corporation releases its first quarterly economic forecast update

Posted: August 11, 2011 1:55 a.m.
Updated: August 11, 2011 1:55 a.m.
 

The Santa Clarita Valley Economic Development Corporation has issued its first quarterly economic forecast update report.

Describing the economic climate in SCV as lacking improvement in the second quarter, employment, housing and construction were identified as ongoing barriers to economic growth.

Working with economic forecaster Mark Schniepp and his consulting firm, California Economic Forecast, the SCVEDC’s first report summarizes economic conditions nationally and in the local economy.

Labor market
As reflected by the SCVEDC in the economic snapshot report released last week, the city of Santa Clarita’s 7.3 percent unemployment rate barely nudged down however from the 7.5 percent rate of one year ago.

The SCVEDC’s quarterly forecast update reports labor-market gains have reversed since the recovery began.

“In Southern California, we have many large companies that have made cuts, increased productivity and are now sitting on large amounts of cash,” said Jonas Peterson, president and CEO of the SCVEDC.

Unfortunately, a high level of uncertainty in the marketplace is causing those companies to be very cautious with hiring and new investments, he said.

“The good news for our local economy is that we have a relatively strong mix of companies that are expected to grow and housing affordability is at a 10-year high,” Peterson said.

“As hiring picks up, we are positioned to capitalize on growth.”

Housing
The housing market and construction of new homes remains stagnant and is unlikely to improve until the unemployment rate decreases further, the SCVEDC report stated.

In April, Schniepp predicted the new-home construction sector would rebound this year.

Speaking at the SCVEDC’s economic conference, co-sponsored by College of the Canyons, Schniepp said a correction in the real estate market would occur this year in the third quarter.

Back then, few foresaw a lengthy deficit and debt-limit debate by Congress, resulting in a last-minute resolution, and the roller-coaster ride of the stock market in the past several trading days.

The time for a housing revival should be here by now, but the general economic uncertainty and slow job growth are hindering a “sure revival,” Schniepp said.

The effect these third-quarter events will have on the overall market remain to be seen.

But economists and local industry experts all agree, when the housing market does take off, demand for new housing will be unprecedented.

First-half of 2011
In the SCVEDC’s forecast update, Schniepp said economic recovery has slowed considerably in the country.

“The entire first six months of 2011 showed very little traction, and that has given rise to more predictions of a double-dip recession in the coming months,” Schniepp said.

Gross domestic product growth was revised downward to less than 1 percent in the first quarter, and only measured 1.3 percent in the second quarter.

Citing weak consumer confidence, a slump in manufacturing, and lack of jobs being created by the private sector, these factors are contributing to the ongoing economic malaise.

The late decision by Congress to increase the debt ceiling and absent consensus on how specifically to reduce the nation’s debt has injected more doubt.

“Everyone agrees that the lack of resolution regarding the federal debt ceiling has hurt the economy,” Schniepp said.

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