Economic Growth to Cool Off, Analysts Say

Coming off its most successful year in a decade, the Ventura County economy will continue to expand through 1999 but at a more modest pace, analysts predicted Thursday during UC Santa Barbara’s annual forecast seminar.

Because of increasing uncertainty over the national and state economies and spreading overseas financial crises, the analysts said the local economy should begin to cool later in the year with slower job creation, curtailed wage growth and more restrained consumer spending.

“With all that’s going on in the world today and with all the uncertainty, I don’t think that that kind of growth is sustainable.” said Mark Schniepp, director of the UC Santa Barbara Economic Forecast Project. “We’re looking for a slowdown. . . . . [The economy] is still going to be growing, but just not like it did in 1998.”

Several hundred area business leaders attended the sixth annual seminar, hosted by the university and held at the Marriott River Ridge in Oxnard.

Since climbing out of the recession of the early 1990s and a near-crippling collapse of the Southern California real estate market, the Ventura County economy has made a robust and surprising recovery, peaking in 1998 with soaring real estate sales, negligible unemployment levels and increasing wages.

Employment growth in the county last year exceeded even the highest preliminary projections, increasing 3.5% with the addition of more than 8,400 nonfarm jobs.

During the same period, the average annual wage increased to $27,699, which helped account for the 6% increase in consumer spending.

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The residential real estate market was also at its strongest point in more than a decade, with sales increasing by more than 23% through 1998 from the previous year, accompanied by a 7% surge in median home price.

“It was a landmark year,” Schniepp said. “In all sectors, the [Ventura County] economy was strong, and it still is.”

The county, however, cannot remain aloof from the growing economic pressures that are already slowing the national and state economies, the economists said. But they said the momentum the county has built over the past several years should keep it more buoyant than other regions in California.

The world economy has not been this weak since the years immediately preceding World War II, experts say.

Serious financial crises, such as those wracking Japan, South Korea and Russia, have cut demand for U.S. exports, resulting in widening trade imbalances and layoffs in the manufacturing sector.

Although some of those countries have begun to mend their economies, economists say these nations are still unstable and have yet to begin contributing strength to the global economy.

Also, world markets are so volatile that most economists predict there will be other overseas financial crises that could further undercut U.S. economic strength.

“I think there’s a high probability that we’ll have another financial accident like the one that happened in Brazil,” said James Goldberg, managing director for Los Angeles-based investment firm Trust Co. of the West. “And unless the world economy begins to improve, I don’t think we’ll be able to maintain that kind of growth that this country has had over the past few years.”

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Contributing to that uncertainty is a volatile stock market that many feel is overvalued, layoffs in the manufacturing sector because of decreased demand overseas, less robust national reports and Y2K, Schniepp said.

Specifically, he predicted job growth will increase by 2.4% this year, down from a 3.5% increase in 1998.

Retail sales, which increased 4.8% last year, should increase by 2.7% in 1999, he said.

And after jumping 3.4% last year, real income should increase by 1.8%, Schniepp said.

Still, experts say the real estate market should remain as strong as in 1998, when about 14,000 homes were sold.

“I’d say Ventura County’s real estate market is going to stay at about the same level it was at in 1998,” said Michael Carney, a professor of finance and real estate at Cal Poly Pomona, who spoke at the seminar. “And if I’m wrong, it’ll be higher.”

Little of the news caught local business people off-guard.

Most had anticipated 1999 being less robust than the prior year, though they still expect it to be strong.

According to a survey of area businesses conducted by the university’s Economic Forecast Project, only 30% of respondents said they expected their business to improve in the coming six months.

“Confidence is sliding, but that’s not to say that they think the economy is going to take a dive,” Schniepp said. “For many it’s just that business was so good in 1998 they can’t see it getting any better.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Ventura County Demographic and Economic Projection

1999

Population: 742,196

% growth rate: 1.6%

Civilian labor force: 394,509

Employed residents: 371,572

Unemployment rate: 5.8%

Employment rate*: 50.1%

Housing stock (total units): 249,257

Persons per household: 2.98

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2007

Population: 832,136

% growth rate: 1.3%

Civilian labor force: 442,033

Employed residents: 418,582

Unemployment rate: 5.3%

Employment rate*: 50.3%

Housing stock (total units): 271,646

Persons per household: 3.06

*Percent of Population Employed

Source: UCSB Economic Forecast Project

Top Ventura County Employers’Largest Changes in Employment Jan. 1998-Jan. 1999

Principal Job Gains

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Total Total Net Gain Jobs Jobs or Loss Percent Jan. 99 Jan. 98 in Jobs Change Point Mugu 7,985 6,536 1,449 22.2 Wellpoint 3,442 2,821 621 22.0 Countrywide 2,450 2,000 450 22.5 Kinko’s 1,248 850 398 46.8 Simi Valley Unified 2,373 2,029 344 17.0 Technicolor Video Services 2,500 2,200 300 13.6% Ventura County Health Care Agency 2,000 1,800 200 11.1% Harbor Freight Tools 1,600 1,400 200 14.3% Conejo Unified 2,523 2,331 192 8.2 Waterway Plastics 509 350 159 45.4

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Principal Job Losses

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Total Total Net Gain Jobs Jobs or Loss Percent Jan. 99 Jan. 98 in Jobs Change Channel Islands Properties 100 514 -414 80.5 California Lutheran University 500 842 -342 -40.6 Purepak Inc. 150 350 -200 -57.1 Ametek 0 177 -177 -100.0 Spatz Laboratories 125 275 -150 -54.5 Mandalay Berry Farm 157 300 -143 -47.7 Haas Automation 699 835 -136 -16.3 Harris Corp. 250 350 -100 -28.6 Gaiser Tool Co. 253 348 -95 -27.3 Bank of America 470 564 -94 -16.7

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SOURCE: UCSB Economic Forecast Project