Economist: Sonoma County outlook is bright

Sonoma County’s economic outlook continues to shine bright, based on strong job numbers, a growing housing market and infrastructure investments such as the Sonoma-?Marin Area Rail Transit commuter train, a noted economist said Friday.

The county’s metrics are all positive in the aftermath of the financial crisis, with an unemployment rate of 4.9 percent in September and a median income of $61,029 last year, both better than the state and national rankings. But across the board, the local, state and U.S. economy should continue to improve in the coming year, said Chris Thornberg, founding partner of Beacon Economics, a Los Angeles-based economic consulting firm.

“I continue to be optimistic. Indeed, the forecast boils down to this: there’s a lot more treats than tricks in our economy today,” Thornberg said Friday in a presentation sponsored by the Sonoma County Economic Development Board. He has addressed the board for the past 11 years and has been credited with identifying problems in the housing and mortgage markets before the 2008 crash.

Economic growth will continue to accelerate through 2015, Thornberg said, thanks to a growing labor market, record-level business investment and greater bank lending, including in the home mortgage market. California will be one of the stronger economies in the nation, he said, with Sonoma County on track to soon surpass its peak before the financial crisis.

Thornberg said he closely monitors three major indicators - construction, government spending and trade. Construction was 9 percent of the gross domestic product before the financial crisis and has recovered to about 6 percent, with most of the lag in home construction. Locally, he called for an overhaul of the California Environmental Quality Act, which some contend hampers development.

On the trade front, the U.S. trade deficit as a percentage of GDP was at 2.3 percent for the second quarter, down from around 6 percent before the housing crisis. However, exports of U.S. goods are hampered because of weakness in other parts of the world, Thornberg said. “The rest of the world’s economy is not that good right now,” he said.

Thornberg also called for more government spending in non-?entitlement programs such as infrastructure - like the SMART train - and education, while also trying to deal with long-term spending projections for Social Security and Medicare.

He also debunked the notion that California is not competitive with other states, a myth he said is perpetuated by politicians like Texas Gov. Rick Perry, who has made a name for himself in trying to recruit Golden State companies.

The reality, Thornberg said, is that high taxes and regulation are not that great of a factor. The state is still outperforming others, ranks 21st in growth and has added about 300,000 new jobs over the past year, he said. Certain industries are more vulnerable than others, he said, but some are doing great.

Locally, other signals are strong, such as the wine industry where California exports are up to $527.7 million this year compared to $509.5 million at this point last year. Tourism, which also is a major economic force, is up as hotel occupancy rates have rebounded since the financial collapse. About 73 percent of the county’s hotel rooms are occupied, up from 53 percent about five years ago. Restaurant and hotel taxable receipts are up 8.1 percent from the past year.

He noted California agriculture is also doing OK in the midst of a drought as farm income and employment are still strong. He then took a controversial opinion not shared by many businesspeople in the room at the Santa Rosa Hyatt Vineyard Creek Hotel: He argued that there is no drought, noting there is more state agricultural acres in production than five years ago.

“We don’t have a drought. What we do have is a water shortage. It’s different,” Thornberg said. “A drought is when that water shortage is starting to have significant economic impact on your economy. I have been showing you the numbers. Does anyone see a significant economic impact? No.”

While the housing market is strong - with home prices rebounding in Santa Rosa to a median of $458,946 - there is some concern as construction permits for single-family homes and apartments in 2014 remain low compared to recent years.

“This is a big issue because the one thing the state desperately needs is new housing. That’s the biggest problem our state faces. It’s not taxes. It’s not regulation. It’s a lack of housing, and an incredibly unaffordable housing market,” he said.

You can reach Staff Writer Bill Swindell at 521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.