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Economists paint future a subdued rose

Recovery will be slow but signs are encouraging, experts agree at economic conference

Posted: February 22, 2013 7:26 p.m.
Updated: February 22, 2013 7:26 p.m.

The economic recovery still has a way to go before total household income rises to pre-recession levels, but recovery is occurring, economic experts said during a Santa Clarita Valley conference this week.

Mark Schneipp, director of California Economic Forecast, said Santa Clarita experienced a healthy job growth last year and is likely to improve even more in 2013.

“The Santa Clarita Valley created the most jobs since 2006,” Schneipp said.

In fact, said Schneipp, Santa Clarita is showing stronger job growth numbers than the San Fernando Valley.
Two companies in particular account for a large number of new hires last year: Advanced Bionics and Aerospace Dynamics, he said.

As for wages, average salaries in Santa Clarita sit just under their peak levels prior to the recession, he said. But, when total household incomes are adjusted for inflation, median incomes are actually at levels marked in 2000, Schneipp said.

The reduced household income creates a disconnect between consumers’ sense that the recession is ongoing and the fact that economic indicators point to a clear recovery, he said.

“The average salary has been rising for the last three to four years, but total household income is not rising,” Schneipp said. “It’s not rising because there are fewer people in households working today.”

In addition, companies are not hiring at the rates typically seen when exiting a recession, Schneipp said. In the past 10 years, companies have saved their cash; when they did make investments, it was for software, equipment and technology purposes, he said.

Nor have the usual industries led the way in hiring as part of a recovery.

“Normally we come out of a recession with construction and manufacturing driving the job growth,” Schneipp said.

“But neither of those industries is producing jobs right now.”

While building has led to job growth and economic activity in the past, there was very little building activity in Santa Clarita last year, he said.

But with a bit of an uptick, the new home market showing is now creating economic momentum and will create more jobs.

Commercial building has been at a standstill, Schneipp said, though there are some 5 million square feet of space waiting to get under way locally.

Schneipp spoke during the third annual Economic and Real Estate Outlook Conference on Thursday.

Another expert at the conference predicted less building will be needed in the next 50 years as the population of California declines. Companies will need less space, said Bill Watkins, executive director for the Center for Economic Research and Forecasting at CalLuthern University.

The statewide population growth is nearly zero, baby boomers are aging and retiring, and workplace trends are changing the need for space, he said.

The Internet has reduced the need for brick-and-mortar stores, employees spend more time telecommuting and working from homes, and the 3D printer is changing the world of manufacturing, which will drive down demand for industrial space, Watkins said.

Declining population is a problem, according to Watkins, who said there has “never been a society that has recovered after a serious population decline.”

Watkins said a massive increase in immigration is needed.

“Legal immigrants work, pay taxes and are the most motivated to take risks and start a business,” Watkins said.

The aging population in California over the next 10 years will increase the demand for health care, Schneipp said. That, in turn, will create more jobs.

Watkins believes there will be modest growth and ongoing weak job growth with persistently high unemployment in California, though he does note the general coastal regions of the state fare far better than the inland areas of California.

The entry-level workforce will continue to struggle to find jobs, Schneipp said, but jobs growth will improve this year and next.

He also predicts a fast-paced recovery in the housing sector and a 4 percent to 5 percent growth in the retail sector. New housing will really pick up in 2014, he said.

Schneipp cautioned people not to monitor the unemployment rate as a means of gauging the economy’s health.

The jobless rate will come down slowly, but other areas are showing positive gains.

“Car sales are soaring,” he said. “Inflation is contained, housing is recovering, builder optimisim is at a seven-year high and the stock market is close to an all-time record high,” he said.



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