OAKLAND - The Bay Area economy has likely stabilized near the bottom of its three-year contraction, but the pain of high unemployment and sluggish retail sales are likely to remain through 2010, according to a new report.
"Today we are forecasting some pretty bad news for the Bay Area economy," said Paul Fassinger, director of research for the Association of Bay Area Governments, which released the annual forecast Tuesday.
The economy is forecast to remain near the bottom of the financial crater carved out by three years of economic contraction due largely to a collapse in the housing market and Wall Street.
The Great Recession has demolished 200,000 jobs in the Bay Area in the last two years, and another 20,000 are forecast to vanish in 2010.
"There have been a tremendous number of layoffs," said Howard Roth, chief economist for the state Department of Finance. "That means there is a lot of hardship out there. It is going to take a long time to get back to prosperity."
Bay Area employers will slowly resume hiring in 2011, when they are expected to add 8,000 jobs across the nine-county region.
High unemployment will continue to inhibit consumer spending, Fassinger said. Last year, total retail sales plunged a record 8.2 percent in the Bay Area. This year, retail sales will remain virtually flat, inching up just 0.4 percent, and rise 2.2 percent in 2011, ABAG forecast.
The silver lining is that the recession is likely over, meaning the region's economic output has stopped contracting, Fassinger said. Eventually, after that stabilization takes hold, the economy will begin adding jobs again - albeit very slowly.
"We'll probably only see some minor increase in employment in 2011," Fassinger said. "But unlike last year, we don't see things getting worse."
The region's housing market is also beginning to stabilize, said Andrew LePage, an analyst with MDA DataQuick. Prices are appearing to level off and sales have increased, he said.
"The Bay Area housing markets are increasingly showing signs of pricing stability," LePage said. "Month after month there is more evidence that prices have bottomed out."
Recent data has also shown improvement in some sectors of the economy, Fassinger said. Health and education services are strong and technology is an important economic driver in the Bay Area with companies such as Google and Apple remaining highly profitable.
The federal stimulus also helped staunch economic bleeding, and is slowly starting to pump life into some sectors, Fassinger said.
"That is something that continues to shore up the recovery," he said. "It takes a long time for that sort of money to show up in projects."
Sonoma County didn't suffer as sharp a drop in consumer spending during the recession, but will lag behind other counties as the Bay Area recovers, ABAG forecast.
Taxable sales declined 6.7 percent last year in Sonoma County, compared to a 7.7 percent decline across the region. ABAG forecasts taxable sales will increase 0.6 percent this year in Sonoma County, compared to a 1 percent gain across the region. In 2011, taxable sales will rise 1.7 percent in the county, compared to a 1.9 percent increase in the region.
However, the recovery isn't guaranteed, Fassinger said.
"If you see a lot more unemployment, that will feed into the housing market and force more foreclosures," he said. "There are still a lot of risks out there."
UPDATED: Please read and follow our commenting policy: