Income or growth: Which way the trends?
Published: Sunday, January 4, 2009 at 4:22 a.m.
Last Modified: Sunday, January 4, 2009 at 7:38 a.m.
INCOME: After 2 recessions, return to top income levels remains years away
Perhaps the most striking prediction of the 2009 economic forecast is that people will have less wealth for years to come.
In the year 2000, average personal income reached its all-time high of $45,395, after adjusting for inflation.
After that, the 2001 recession knocked down per-capita income.
Two years ago, people were again enjoying the wealth of a booming economy, which was fed by easy credit. The average personal income in 2006 was just $500 off the high-water mark.
Then things fell apart.
A rapid succession of events began tearing apart the seams of the economy as housing prices began plummeting, foreclosures increased and the unstable financial tools that had led to easy mortgage loans stopped working and banks faltered.
Financial institutions stopped lending, consumers slowed their spending and employers began handing out pink slips.
Average income fell to $43,240 in 2008, and is expected to fall about another $700 during the next two years.
Put another way, $500 million less will be flowing to the pockets of Sonoma County's 490,000 residents this year than in 2006, after adjusting for inflation.
Income levels are not expected to return to 2006 levels until sometime after 2014.
-- Nathan Halverson
GROWTH: No bounce-back this time
Here is one of the bright notes in a mostly dour forecast: The local economy will not contract nearly as severely as it did in 2001, when the county's telecommunication industry was decimated along with other tech sectors.
That earlier recession dropped the gross county product by an inflation-adjusted $2 billion dollars -- or 13 percent -- in one year.
In the current recession, the economy's output shrank by .2 percent in 2007, and then 1.5 percent in 2008, according to the report. After adjusting for inflation, that is a drop in output of about $240 million annually.
However, after the 2001 recession the economy bounced back quickly. That is not expected to happen again.
The county will grow at an average annual rate of 1.9 percent for the next six years after adjusting for inflation. That is half the rate the economy grew annually from 1994 to 2005, excluding the recession year of 2001.
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