Oxnard

1
Santa Barbara Economic Outlook
On A Downward Drift
Bill Watkins
October, 2006
2
Outline

• W.I.B. study
• United States Topics
• California Topics
• Santa Barbara
• Real Estate Topics

3
Workforce Investment Board 2006
4
Purpose

• commissioned by the Santa Barbara County
  Workforce Investment Board for two purposes.
• Update State of the Workforce 2003 study,
  secondary research.
• Learn about the workforce skill, primary research.

5
Employment Update

• As many as 40,000 Santa Barbara County workers
  are either self employed or commute out of the
  County.
• Jobs
• Other Services 70,333 jobs, 37 percent of County
  jobs.
• Government is the second largest sector, about
  half the size of Other Services sector
• Retail Trade and Agriculture combine 20 percent
  of the countys jobs.
• Agriculture wages have failed to keep up with
  inflation.

6
Employment Update

• Job Growth
• The County gained 6,400 jobs since 2002, about
  2,100 per year.
• The Wholesale Trade, Retail Trade, and F.I.R.E.
  sectors all lost jobs.
• Other Services sector increased just over 3,500
  jobs, or 55 percent of all net new jobs.
• Combined Agriculture and construction represented
  87 percent of all new jobs.

7
Employment Update

• Regional Differences
• All net new Santa Barbara County jobs were
  created in North County.
• Almost all net new County jobs since 2002 have
  been in Services or Agriculture.
• Santa Barbara Countys South Coast is slowly
  loosing jobs.

8
Workforce Skill Sets

• Objective learn how workers skill sets may
  differ from the skill sets required by their
  jobs.
• Justification
• Divergence may arises because of the small
  economy and the communitys desirability as a
  place to live.
• Partners or spouses of highly-educated workers
  may have difficulty finding appropriate positions.

9
Workforce Skill Sets

• Focus Groups
• Workers throughout the County.
• A relatively large unknown proportion of the
  workforce was underemployed.
• Underemployment was a cost of living in Santa
  Barbara County.
• We elected to perform a web-based survey to try
  to measure the size of the underemployed
  workforce.

10
Workforce Skill Sets

• Survey Findings
• No respondents had held their job for more than
  15 years, and only 10 percent had held their job
  for less than five years.
• respondents mostly highly trained and educated.
• Over 60 percent of respondents hlld jobs that
  require significantly different skills than a
  previous job.

11
Workforce Skill Sets

• Survey Findings
• Almost 40 percent consider themselves
  underemployed.
• About 40 percent of respondents who currently
  hold jobs that require different skills than a
  previous job reported that they could earn more
  money with a position more like their previous
  job.
• The median such amount was 19,000 the mean was
  22, 399, and the mode was 10,000.

12
United StatesEconomic Topics
13
The United States economy has shown remarkable
resiliency. It is all about Productivity,
International Trade, Wealth, and a Service
Economy.
Bill Says
14
Real Consumption per Capita
United States
000s
40
35
30
25
20
15
10
5
0
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
15
Real Gross Domestic Product Growth
United States
16
Total Employment Growth
United States
17
United States
Unemployment Rate
4.6!
18
If the Feds overly-aggressive interest rate
increases cause a recession, it will probably be
in 2007, and it will be mild.
Bill Says
19
There are Other Risks

• Geopolitical Risks
• Oil Supply Interruptions

20
Californias Economy
21
Unemployment Rate
California
22
Real Gross State Product Growth
California
23
California Impact of a FED-Induced Recession

• Less immediate than the past recession
• Gradual
• Milder than the past recession
• Strong home prices

24
Santa Barbara
25
Dr. Dave Christy Says
You cant keep things the same and make them
better at the same time.
26
Demographic Trends

• Shrinking
• Aging
• Growing Wealthier

27
2005 1-Year Population Growth
for Regions in Santa Barbara County
3.6
1.7
-0.3
-0.4
-0.5
-0.6
-0.7
-0.7
Buellton
Carpinteria
Goleta
Guadalupe
Lompoc
Santa
Santa
Solvang
Maria
Valley
Barbara
28
2006 Median Age (in years)
for Cities in Santa Barbara County
29
2006 Median Household Income
for Cities in Santa Barbara County
30
2006 Owner-Occupied Housing
for Cities in Santa Barbara County
73.3
69.1
64.0
58.6
57.1
55.7
50.7
41.6
Buellton
Carp-
Goleta
Guada-
Lompoc
Santa
Santa
Solvang
interia
lupe
Barbara
Maria
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Economic Trends

• Low unemployment
• Slow growth
• Declining firms
• Declining jobs
• Dominated by Service Sector

32
Unemployment Rate
Santa Barbara County
7.2
6.7
5.8
5.1
5.1
5.0
4.7
4.4
4.4
4.4
4.4
4.3
4.3
4.3
3.9
1994
1996
1998
2000
2002
2004
2006
2008
33
Real Gross Regional Product Growth
Santa Barbara Metro Area
17.1
14.6
5.4
5.4
5.2
5.1
1.6
1.5
1.3
1.0
0.7
0.5
-0.1
-0.6
-1.4
1994
1996
1998
2000
2002
2004
2006
2008
34
Private Sector Firms
Santa Barbara Metro Area
5,866
5,730
5,570
5,540
5,518
5,516
5,418
5,353
5,270
4,654
4,421
4,375
4,349
4,310
4,242
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
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Number of Firms Gained/Lost 2001 to 2005
Santa Barbara Metro Area
Agricultural Production
Mining and Quarrying
Construction
Durables Manufacturing
Non-Durables Manufacturing
Transport/Communications/Utilities
Wholesale Trade
Retail Trade
Finance/Insurance/Real Estate
All Other Services
All Private Sectors
36
Total Employment Growth
Santa Barbara Metro Area
28.3
10.0
8.1
4.3
3.1
1.5
1.4
0.3
0.2
-0.1
-0.4
-0.6
-0.6
-0.7
-1.2
1994
1996
1998
2000
2002
2004
2006
2008
37
3-Year Job Growth by Industry
Santa Barbara Metro Area - 2005
-4.7
Agriculture
-72.5
Mining
Construction
10.3
-9.5
Durable Manufacturing
-15.3
Non-Durable Manufacturing
-4.4
Trans., Comm. Utilities
-20.8
Wholesale Trade
-0.9
Retail Trade
Finance, Ins. Real Estate
-3.5
Other Services
1.2
-1.6
Government
38
2005 3-Year Real Gross Regional Product Growth
for Metro Regions in Santa Barbara County
16.0
15.5
10.1
7.4
7.0
5.2
1.7
Carpinteria
Goleta
Lompoc
Santa
Santa
Santa
Santa Barbara
Metro
Valley
Barbara
Maria
Ynez
County
Metro
Metro
Valley
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Employment Distribution (jobs)
Santa Barbara Metro Area - 2005
730
Agriculture
50
Mining
Construction
4,362
2,387
Durable Manufacturing
Non-Durable Manufacturing
548
2,853
Trans., Comm. Utilities
Wholesale Trade
1,477
8,116
Retail Trade
Finance, Ins. Real Estate
5,523
36,139
Other Services
Government
12,230
40
Santa Barbara has a service economy.
Bill Says
41
Two Types OF Services

• Tradable
• Non-Tradable

42
Benefits OF A Service Economy

• Clean
• Low Volatility

43
In A Non-Tradable Service Economy

• Economic growth requires
• Population growth
• Increase in average wealth
• Change in spending toward services
• Economic growth is likely to be slow

44
Increased Economic Growth Would Require

• Increased manufacturing
• Increased population growth
• Increased average wealth
• Increase tradable-service production

45
A lack of economic growth has consequences.
Bill Says
46
Problems with no economic growth

• Zero is really close to negative
• Lack of opportunity
• Upward mobility requires relocation
• Increases cost of unemployment change

47
The future without intervention

• No tradable goods producers
• Manufacturing
• Agriculture
• Services
• Jobs concentrated in low-paying retail and
  service sectors

48
The future without intervention

• Five populations
• Retirees and Visitors (Big)
• Merchant, Professional, Technical, and Trades
  (Small)
• Government, University workers, and Students
  (Big)
• Very-low-wage workers (Big)

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The future without intervention

• Continued high home prices
• Increased commuting for the Merchant,
  Professional, Technical, and Trades
• Extreme crowding in workforce housing

50
The future without intervention

• Continued declining school enrollment
• School enrollment dominated by low socio-economic
  status students

51
What would be the impact on Santa Barbara of a
Fed-induced recession?
52
Real EstateTopics
53
2005 Home Sales per Capita
for Cities in Santa Barbara County
24.0
23.5
17.1
12.5
11.5
9.4
9.4
7.1
Buellton
Carpinteria
Goleta
Guadalupe
Lompoc
Santa
Santa
Solvang
Barbara
Maria
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Nominal Median Home Price
City of Santa Barbara
1,123.0
1,083.1
1,083.3
thousands
1,068.3
895.3
662.3
562.9
500.2
430.4
342.8
295.2
264.2
255.4
250.8
244.5
1994
1996
1998
2000
2002
2004
2006
2008
55
Real Median Home Price Growth
City of Santa Barbara
30.8
21.6
14.7
14.2
13.5
12.5
10.2
9.5
2.7
1.8
0.9
-2.1
-2.9
-2.8
-4.0
1994
1996
1998
2000
2002
2004
2006
2008
56
Housing Unit Permits per 1,000 people
California
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Why Do I Believe Home Prices Will Remain Strong?
Demand Side

• Coastal California is not a local market
• Demographics
• Wealth accumulation
• Interest rates
• Taxes

62
Why Do I Believe Home Prices Will Remain Strong?
Supply Side

• Limited numbers
• Delay
• Uncertainty
• Fees
• Property rights

63
California Existing Single-Family Homes
Number of days
on market
100
90
80
70
60
50
40
30
20
10
0
Jan-82
Jan-86
Jan-90
Jan-94
Jan-98
Jan-02
Jan-06
64
California Existing Single-Family Homes
Supply of listings (in
number of months)
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Jan-82
Jan-86
Jan-90
Jan-94
Jan-98
Jan-02
Jan-06
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