Escalating job losses and the decaying housing market weighed down the local economic outlook once again in July, leaving little doubt among economists that the region is in recession.
The University of San Diego’s monthly report on leading economic indicators fell again in July, led by plunging consumer confidence, a jump in job losses and worries about the national economy.
“I would say the local economy is in a recession right now,” said Alan Gin, an economist with USD’s Burnham-Moores Center for Real Estate. “The unemployment rate is 6.4 percent – the first time we’ve been above 6 percent since the 1990s.”
Hiring remains weak, while the pace of job losses continues to be high. Though housing and construction have been the main culprits behind job losses, unemployment is increasingly spreading to other sectors of the economy, such as auto sales and some retailers.
“We’ve got a lot of job losses in the county,” said Gin. “For the first seven months of the year we’re down” in terms of year-over-year job growth.
The county had 4,600 fewer salaried workers in July than it did in July 2007 – the fourth time in five months that the county had a year-to-year job loss.
Some sectors of the economy, such as biotech and technology, are holding up reasonably well, say economists. Local stock prices declined in July, but not as severely as earlier in the year.
But the intensity of the housing downturn has overshadowed any gains by other sectors, dispelling the often-repeated notion that San Diego’s economy was too diverse to suffer in a recession.
Gin used to endorse that theory. But not anymore.
“It turns out the damage from housing, the loss of employment from housing, is much more severe than I would have thought,” he said.
It’s uncommon for housing to drive an economic downturn. The 2001 recession was sparked by a bubble in technology stocks. The early 1990s recession spread from cuts in federal defense spending and overbuilding of office buildings.
“We haven’t had a housing-driven recession in my lifetime,” said Dan Seiver, a finance professor at San Diego State University. “The problem with that is housing is so widely held, and it’s such an important asset” for most households.
Seiver said there is “no doubt” the local economy has been in a recession all year. “There’s a lot for consumers to be pessimistic about,” he said. “I don’t think that’s unrealistic.”
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