SAN DIEGO—From reduced employment opportunities to the “STEM divide,” the US needs to focus on these issues to achieve true economic growth, Alan Gin, associate professor of economics at USD School of Business, told attendees at last week's 33^rd Annual San Diego County Economic Roundtable. Sponsored by the County of San Diego, the San Diego Workforce Partnership, the San Diego Union-Tribune and the University of San Diego School of Business, the event, which took place at USD, discussed a myriad of issues affecting the national and local economy.

Jaime Alonso Gomez, dean of the USD School of Business, began with some general comments about the local economy. The goal is for the San Diego region's GDP, which closed 2016 at about $220 billion, to reach $250 billion, he said. Jeff Light, editor of the Union-Tribune, said there was a mixed bag of indicators about how the region is doing economically.

Next came presentations from six experts, three of which are detailed here; the remaining three will be detailed in a separate story. Ray Major, chief economist with the San Diego County Board of Supervisors, District 2 (also known as SANDAG), said that if Hillary Clinton had won the election, his answers to economic questions would be “1% or 2%,” but with Trump's win came a lot of questions. Predictions about the economy swung wildly immediately after the election, which Money Magazine warning of global recession on Nov. 9 and predicting just the opposite not long after. He said Trumponomics is a combination of policies involving tax cuts, Obamacare's repeal and replacement and other issues, but how much of it gets implemented is still uncertain—it takes time to pass new legislation. However, tax cuts lead to higher growth rates, employment and inflation, and interest rates are expected to increase to 2% to 3% by 2018.

Major went on to talk about San Diego's huge, diverse economy. Regarding jobs, the peak had been in December 2007, the trough in January 2010, and we reached recovery in June 2014. Driving sectors for the local economy include innovation, tourism and the military, as well as healthcare and social assistance, education and government—the latter four of which are generally resistant to recessionary pressures. Construction employment is still below 2007, but innovation and the military continue to thrive, and government will continue to grow despite expected changes at the federal level due to Trump's policies. Finance and professional services will grow slowly, and manufacturing has grown steadily.

Roughly one-quarter of a million new jobs were created here since the bottom of the trough, but wages haven't grown. Deporting workers will cause wages to rise, which will entice people to move here. Trump's wall and deportations will mostly impact the Central and Imperial valleys.

With regard to housing, Major said more multifamily homes are being built in this market than single-family homes and more now than in 2006. Home affordability is only at 24%. “There is good employment, but housing is the issue” due to decreased affordability.

Next, USD's Alan Gin gave his presentation on the national economy, saying we have had no annual growth rate of more than 3% in a long time. Consumption and government expenditures at the federal, state and local level are down (the latter being a negative-contribution situation), and we need to boost these to grow the economy. However, while we lost 8.7 million jobs during the recession, we gained back 15.6 million in the last 83 months, and the private sector has seen continuous job growth.

Gin said while there is speculation that discouraged job seekers who stopped looking are contributing significantly to the unemployment rate, in reality that cohort only adds 1%; however, people who are underemployed and part-time workers who wish to be full-time workers make up 9% of the total unemployed. This has been a trend for decades, he said. “We peaked out in labor-force participation in the late '90s.”

The reasons for the decrease in labor-force participation have much to do with Baby Boomers retiring, decreased participation by students (since high-school and college students aren't working as much as they used to, and labor-force participation statistics start at age 16), disability and Affordable Care Act policies that allow one to leave the workforce and still have health insurance. “The labor market is finally beginning to tighten,” said Gin, adding that there has been greater use of temps and part-time workers in recent times. The economy is growing, but slowly.

Gin listed four big long-term issues that need to be addressed:

reduced employment opportunities, caused by globalization, technology (the Internet and automation) and the gig economy
retirement crisis, due to the low level of savings
the STEM divide and our country's lack of strength in those areas; education and skills are more important than ever
growing income inequality, which could lead to social unrest; income inequality has increased since the 1980s.

For San Diego, Gin said the leading indicators have been flat: job growth for the region is forecasted at 30,000 in 2017, with unemployment increasing slightly. Job growth will be concentrated in healthcare, administration and waste services, leisure and hospitality and construction. Low single-digit gains are expected in the housing crisis, he said.

Next, Tina Ngo Bartel, director of business programs and research for the San Diego Workforce Partnership, gave a presentation on employment in the region. She said small businesses rule in San Diego, with 95% of employers in the region having less than 50 employees. Networking is the number-one way these employers recruit talent, so her organization hosts events like Hiring at Happy Hour, which takes place at a local brewery. Programs like placing interns with retailers (provided by a retail grant), work readiness and apprenticeship all help fast-track job seekers into the workforce and fill a need for employers.

During the Q&A portion of the event, housing affordability was a central issue. Major said 75% of the population growth in San Diego is due to births, with fewer people coming into the region due to low housing affordability. Gin said there are changing attitudes about homeownership among Millennials, who have less of a desire to purchase homes and so few homes available. Major said Millennials want experiences more than material possessions.

To the question of whether San Diego is in a housing bubble, Gin said prices are high, but we are in less of a bubble than we were before the recession because supply is so low and we haven't been overbuilding. Major said we need to keep an eye on affordability in San Diego.

Gin listed four big long-term issues that need to be addressed:

reduced employment opportunities, caused by globalization, technology (the Internet and automation) and the gig economy
retirement crisis, due to the low level of savings
the STEM divide and our country's lack of strength in those areas; education and skills are more important than ever
growing income inequality, which could lead to social unrest; income inequality has increased since the 1980s.

Instant Insights /

Four Big Long-Term Issues With the Economy

Related Stories

Recommended For You