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EAST BAY QUARTERLY FORECAST
INTRODUCTION
East Bay EDA is pleased to provide the East Bay Quarterly Update, with an introduction and outlook authored by Jerry Nickelsburg, Senior Economist with the UCLA Anderson Forecast. We are redesigning East Bay EDA's Quarterly and Monthly reports and welcome your thoughts and suggestions. Click here to Download the PDF version of this report.
To view the Bay Area "by the numbers", download the Quarterly Indicators Sheet for Q3 2009. This one-page summary includes GDP, CPI, employment, housing, construction permit, hotel, airline passenger, and foreign trade data.
EAST BAY RECESSION DYNAMICS
Jerry Nickelsburg
Senior Economist
UCLA Anderson Forecast
“problems are only opportunities in work clothes” … Henry J. Kaiser
This quotation from East Bay industrialist Henry Kaiser aptly characterizes where the region is today; there are plenty of problems, but there are also plenty of opportunities. Understanding how they will sort themselves out as we approach the end of this –the deepest recession in almost 80 years – is the challenge of describing the incipient recovery. Looking backward, the recession had two phases. The first was centered on housing and finance markets. Excess home appreciation and a burgeoning of employment in these sectors led to the subsequent sharp contraction during this phase. The second phase was dominated by the global recession. As a locus of international trade and of wholesale and distribution activity for the Bay Area, the East Bay saw job loss accelerate in the manufacturing and trade sectors. Now at the cusp of a U.S. economic recovery, we find evidence of a turning point in East Bay economic activity, but that evidence is extremely weak, particularly with respect to how the recovery will unfold.
Some have said that because the East Bay had greater excesses in home appreciation, residential construction and housing related employment, and because it experienced the downturn in these key sectors a bit earlier than other parts of the Bay Area, that the East Bay should come out of the recession earlier and faster as well. This is not necessarily the case. The East Bay is part of a more complicated Bay Area economy. The demand for housing depends not only on income and employment generation within the narrowly defined region, but also on these factors in San Francisco and the Silicon Valley as well. Though home prices have fallen, the cost of commuting has risen. Increases in the demand for houses is the aggregate of the demand generated by those finding work outside the region and choosing to live in the region, by those finding work in the region, and by the natural increase in the number of households due to demographic forces. So the “first in, first out” theory does not well describe the East Bay recovery.
The key sectors to watch for as the recovery unfolds are international trade, domestic distribution, manufacturing, health care, government and technology. Export generated jobs in international trade and in East Bay manufacturing should be a plus going forward. U.S. policy and public and private investment in health care, infrastructure and technology will be a plus as well. On the negative side are retail and wholesale trade, imports, and government. Residential construction is a mixed picture and depends critically on total Bay Area job generation. When we add all of these up, there is cause for optimism. The opportunities created by the problems in construction, finance, government and consumer related sectors provide a pool of skilled and semi-skilled labor to facilitate the expansion in other sectors, and in the long run, investment in green technology and new manufacturing techniques provide a bright future.
But there is a caveat. Changes in the sectoral balance of employment require dislocations. This is not a fast process which leaves us with a very mixed picture for the East Bay through 2010. In this East Bay Report we highlight the employment, trade and housing trends which point the way to the reallocations of labor and the recession recovery.
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THE CITIES & COUNTIES OF
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CONTACT
This forecast was prepared by:
Stephanie Brown
Economic Development Analyst
(510) 272-6843
East Bay EDA
1221 Oak St., Ste. 555
Oakland. CA 94612
For more information on the East Bay, click on www.eastbayeda.org
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