County Seen Topping State, U.S. Economies

Ventura County’s resilient economy, with low unemployment, high-paying jobs and record housing prices, should continue to outperform the state and the nation this year, provided a war with Iraq doesn’t prompt a major recession, a local economist said Thursday.

Bill Watkins, executive director of the UC Santa Barbara Economic Forecast Project, said numerous risks could hamper the region’s outlook -- from a prolonged war and a possible rise in interest rates to an unresolved state budget deficit.

“I’m worried about all the risks we face. If we end up fighting a war in Iraq and it goes badly, then all of these predictions go out the window,” Watkins told about 300 people gathered in Oxnard for UC Santa Barbara’s annual projections for the local economy. “War may politically benefit some companies, but I don’t think the best way to cut unemployment is to get people shot.”

The best thing President Bush and Gov. Gray Davis could do, he suggests, is remove the uncertainty about a possible war and a state budget shortfall estimated at nearly $35 billion.

“The budget crisis, and the rising cost of doing business [in California] are all things that add risks that Arizona and Nevada don’t have,” Watkins said, adding that businesses may choose to relocate to other Western locales or take future expansion out of state.

Despite troubles elsewhere -- from the Enron scandal, terrorism fears, record low interest rates and manufacturing overcapacity -- Ventura County’s economy made slow but steady gains last year and should do the same in 2003, he said.

“We’ve had Iraq hanging over our heads for about a year, and yet our economy keeps growing,” Watkins said.

In overall terms, according to the Economic Forecast Project, the local economy is big and should get bigger.

The so-called gross regional product -- the value of all goods and services produced in Ventura County -- should climb 8.1% this year to $44.9 billion and grow at a similar annual rate until it reaches $61.5 billion in 2007, the project states. In comparison, Los Angeles County’s much larger gross regional product is only expected to grow 5% to $394.1 billion this year.

Viewing the overall economy another way, on a per-person basis, each Ventura County resident represented $53,200 in goods and services last year, and this year that figure should climb to $56,800, an increase of 4.1% after inflation is included.

Retail sales locally, when measured per individual, were at $9,200 last year and are predicted to grow to $9,600 this year and climb steadily to $12,400 in 2007. That corresponds with total retail sales of $7.1 billion last year, growing to $7.6 billion in 2003 and projected to reach $10.3 billion in four years.

Watkins challenged the belief that the area’s extreme housing prices -- which the Economic Forecast Project expects to reach a median price of nearly $405,000 this year -- are like a bubble set to burst if the economy weakens.

Unlike the housing downturn of the early 1990s, the economist said, a recession would most likely be milder and have a less severe effect on California, while interest rates are lower and mortgages are easier to get.

Those factors, coupled with a limited supply of houses for sale and fewer new homes being constructed, are expected to push the median price steadily upward to $565,300 in 2007.

But such high home prices have downsides: increased traffic from workers who can’t afford to live near their jobs; an exodus of middle-income residents age 25 to 40 who are priced out of the market, and increased densities as more people are forced to pool resources to pay for housing.

Home affordability, as measured by the percentage of people who can afford a median-priced home, has dropped in Ventura County over the past five years, from a high of 44.4% in 1998 to 32.1% last year.

By comparison, median-family income has grown from $63,100 in 1998 to $74,700 in 2002. The UC Santa Barbara project forecasts the income rate will rise 4.5% this year, to $78,100.

The rate of joblessness rose to 5.2% last year, but that figure is still considered full employment, Watkins said.

That rate is expected to rise to 5.5% this year.

The number of jobs in Ventura County reached 303,209 last year, a modest 0.2% increase, or 725 jobs. Watkins said three employers in the east county -- Amgen, Baxter Pharmaceutical and mortgage lender Countrywide -- were responsible for most of the county’s job growth.

More than 5,400 jobs are expected to be created this year, bringing the total number to 308,650.