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NewsUnion Tribune- Region's economy expected to improveJanuary 12, 2009
Cunningham, an economist and senior fellow at the San Diego Institute for Policy Research, joined counterpart Marney Cox from the San Diego Association of Governments to review past recessions for lessons in how to survive the current downturn, viewed by many as the worst since the 1930s. The two said the county is likely to begin an economic turnaround in the second half of this year, ahead of the state and nation. Even though unemployment is expected to continue growing, Cox said an early indicator of improvement locally is the construction sector, which began shedding jobs in 2007 but leveled off last year. “We're seeing more strength now,” Cox said, noting that there were 80,000 construction jobs in October, roughly the same as last January. Cunningham said housing could reach a post-World War II low this year with only 3,000 units permitted, a fraction of the number seen in boom times over the past three decades. On the other hand, Cox said the area can look forward to a $4 billion stimulus from Marine Corps construction this year and next at local bases. Other sectors, such as high-tech research and technology, are likely to remain weak because of a pullback in venture-capital investment. But many laid-off tech workers start their own firms while awaiting job prospects and thus lay the foundation for a strong upturn. For example, Cunningham said 103 high-tech companies were started in the third quarter last year. Meanwhile, Cox said, education jobs remain relatively strong because many unemployed workers are returning to the classroom to gain new skills. Another positive indicator is population growth. Cox said the recession of the 1990s saw a net outflow of residents because economic conditions were better in neighboring states. But with prospects grim throughout most of the country, Cunningham said existing residents are likely to stay put and new residents will arrive to take new jobs. “I think we could see a little stronger population growth in 2009,” he said. Cox said his projections could be upset by two risks – a deeper recession than is currently projected and a further pullback in consumer spending. He also expressed concern about a strong bout of inflation that could follow today's deflationary trends. A member of audience asked how he should structure commercial rents in case inflation results in higher costs unmatched by tenant income. Cox replied that the consumer price index isn't always a reliable guide. For example, steel, concrete and other construction materials outpaced general prices for several years, upsetting engineers' estimates for various SANDAG transportation projects. Another concern on the horizon is a return to rapid home price increases. Cox imagined a scenario in which an economic turnaround prompts rising housing demand. But if it continues to take five to seven years to gain subdivision approval at the local level, builders would be unable to meet demand and a shortage could lead to higher prices and lower affordability. “We have to make the system more efficient,” Cox said. He suggested that local governments act like redevelopment agencies and actively promote housing development through streamlined environmental review. “The idea is to shave off the increase in prices.” Roger M. Showley: (619) 293-1286; roger.showley@uniontrib.com |
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