SDSU Study Sees Mild Recovery for S.D. During Latter Half of Year : Economy: The upturn is expected to be driven in part by population increases, the creation of thousands of new jobs and the resultant increase in personal income.
Consumer confidence remains decidedly low, and San Diego County’s economy continues to falter, but chances are good for a mild recovery during the latter half of 1992, according to an economic outlook released Monday by San Diego State University’s Center for Public Economics.
The projected recovery won’t occur until the second half of the year because the national economy “continues to be held hostage by plant restructurings, the reluctance of banks to lend and wary consumers who have good reason to no longer believe quick-fix forecasts,” SDSU economics professor Raford Boddy said.
Barring unexpected twists, the local economy should begin its relatively weak recovery late in the year, driven in part by population increases, the creation of thousands of new jobs and the resultant increase in personal income, Boddy said.
Although Boddy is generally optimistic about the coming year, he cautions that several developments could derail a local rebound.
One ominous possibility is that General Dynamics, the area’s largest private employer, with 16,000 employees, will spin off its Convair and Electronics divisions, a move that would create significant economic repercussions if the operations--and jobs--end up being moved elsewhere.
General Dynamics Chairman William Anders prompted speculation about the fate of the local divisions in December when he unveiled a corporate plan that includes the possible sale of businesses in which General Dynamics doesn’t have market dominance.
The SDSU outlook is in line with a recent Greater San Diego Chamber of Commerce forecast that, despite the continuing recession, predicts a modest economic recovery during 1992. However, both studies caution that a swift economic recovery is unlikely because of the depth of the slowdown.
According to SDSU’s survey, the local unemployment rate will hover above 6% during the first half of 1992 before falling to 5.7% in the second half. The Chamber of Commerce is predicting that unemployment will average about 6% for all of 1992, down from the 6.4% rate that 1991 is expected to record.
The chamber and SDSU both caution that job creation will be uneven because harder-hit parts of the economy will need more time to recover.
For example, the county’s manufacturing sector will continue to shrink during 1992, Boddy said. And, although commercial construction will probably remain flat, overall construction employment should rise as the residential construction market rebounds, he said.
Increased population should help generate new jobs, at least in San Diego’s trade and service sectors, according to the two studies.
However, population gains do not automatically translate into overall job gains. In 1991, for example, the county lost 18,000 jobs over the 12-month period ending in November, according to state Employment Development Department figures, despite gains in the population over the same period.
“Of the 6,000 total new jobs that we see during 1992, most will be added during the second half,” Boddy said. “We’re seeing the first half of the year as very mild job growth with, perhaps, some continued shedding of jobs” in the manufacturing sector.
The chamber’s job outlook is a bit rosier, looking to the creation of 15,000 jobs during 1992. However, it notes that the new jobs won’t be enough to replace the 33,600 positions lost during the past two years.
The chamber outlook suggests that the county’s gross regional product (GRP) will increase by 4.7% to $62 billion in ‘92, with a “real gain” of 1.9% after adjusting for predicted inflation. That would follow the estimated 1% decline in “real” GRP in 1991, the first inflation-adjusted GRP decrease in San Diego’s economy in nearly a decade, according to chamber officials.
Boddy said San Diego will probably pull out of the recession earlier than the rest of the state because “San Diego more mirrors the rest of the nation, which seems likely” to recover earlier than California in general, Boddy said.
“We’re now more synchronized with the nation,” he said. “Our manufacturing mix is more similar with the nation than California. . . . We’re not so heavily involved with agriculture . . . and San Diego doesn’t have quite the commitment to the Defense Department for defense-related contracting.”
Alan Gin, an economics professor at the University of San Diego, believes San Diego’s stalled tourism industry will get a needed lift from a pair of attractions.
San Diego hoteliers are eagerly awaiting the start next week of the long-awaited America’s Cup sailing regatta, which will pump an estimated $500 million into the local economy. Also, San Diego will be the site of Major League Baseball’s All-Star game in July.
San Diego’s hotels, tourist attractions and restaurants might also share in a nationwide upswing in tourism if Americans who put vacations on hold during the recession decide to start traveling again, Gin said.
Boddy also cautioned that the hard-hit local construction industry might stumble if cash-strapped developers can’t find financing to begin new projects. He predicts 20,000 building permits will be issued to residential home builders in 1992 if financing becomes available.
“We are, admittedly, coming in on the high side of the residential permits,” Boddy said. “But we’re assuming that (builders) will be able to find financing. . . . The pent-up (consumer demand) is there. . . . the only question is whether there will be sufficient development funds available.”
Gin said the presidential campaign may well lead to a tax package that will pump more money into the economy and boost consumer confidence. Lower interest rates will also help turn the tide and restore confidence, he said.
Housing Indicators
Permits 1990 1991 ’92 Forecast Single Family 6,601 5,600 11,000 Multiple Dwelling 9,217 2,800 9,000 Total 15,818 8,400 20,000
Apartment Vacancy Rate 4.7% 5.2% 5.0% Median House Price $176,000 $178,000 $182,000
Source: Center for Public Economics, San Diego State University
Population Trends
1991 ’92 Forecast Population 2,600,000 2,661,000 Percent of Increase 2.5% 2.3%
Sources of Increase
Migration 37,800 21,000 Births 38,000 40,000
Source: Center for Public Economics, San Diego State University
