Economist: Sonoma County has recovered from recession

Sonoma County employment levels have now fully recovered from the recession and the coming year looks bright for the local economy, a UCLA economist said Thursday at the annual State of the County conference.

In fact, the unemployment rate in the Bay Area, which mirrors that of Sonoma County, could dip down to 4 percent within two years, said Jerry Nickelsburg, senior economist for the UCLA Anderson Forecast. Sonoma County’s unemployment rate was 5.1 percent in November, the most recent data available.

While long-term unemployment is still high nationwide, the U.S. economy is slowly moving toward full employment, he said, with California coastal counties like Sonoma County leading the way out of the recession.

The local economy has benefited greatly from strong growth among technology manufacturers and companies that produce wine, beer and specialty food products. Also, rising home prices have started to slow their ascent, leading to a more stable and “normal housing market,” Nickelsburg said.

Only a handful of states, including California, have overcome the recession by forging 21st-century economies with a focus on the information technology and energy sectors, he said.

“That’s really the formula for the future,” Nickelsburg said. “That’s a formula that Sonoma County has really been able to embody.”

Nickelsburg’s positive economic forecast was echoed by county officials and economic experts.

According to the Sonoma County Economic Development Board’s economic indicators report for 2015, the county had the fourth-highest number of businesses among comparable counties, indicating strong economic activity.

Tourism, a critical sector in Sonoma County, also is displaying strength. Hotel occupancy rates rose 6.2 percent in the past year while transit occupancy tax revenues increased by $1.14 million. Tourism brought in $100 million in tax revenues and now accounts for 10 percent of the county’s jobs, said Supervisor Susan Gorin, chairwoman of the Board of Supervisors.

Gorin said last year’s “economic surge” was a welcome development, though it was tempered by cumulative 20 percent county budget cuts since the recession. She said the Board of Supervisors tackled a number of issues last year, including winery expansions, road maintenance, clean energy, youth programs and homelessness, among others.

“These are good times; in fact, they are great times,” said Gorin, adding that “the best is yet to come.”

But Gorin pointed out that the recovery was not occurring evenly. She described the local economy as “bifurcated,” with certain communities still struggling.

“We need to work differently to think about how to improve the lives and wages of those folks who are working so hard in our economy to support their families, often working more than one job,” Gorin said after the meeting.

The county lost more than 30,000 jobs between October 2007 and January 2010, a sharp downturn that wiped out more than 1 in 6 payroll jobs in a little over two years, according to the state Employment Development Department. It has taken five long years to rebuild the damage.

During his talk, Nickelsburg said the accelerating U.S. economy was moving toward an above-average growth rate of 3 percent, primarily because consumers are more confident about the future. The first five years of the recovery were slow, he said, in part because U.S. households were trying to bolster their savings. Now, savings rates have reached 5 or 6 percent, pushing down consumer debt, he said.

One downside of the current recovery is that the long-term unemployed, many of them aging baby boomers, still are unable to find work, Nickelsburg said. Their unemployment numbers are declining, but only because they have dropped out of the labor market, he said.

Historically, older workers who are sucked into long-term unemployment simply age out of the labor market, Nickelsburg said after the meeting.

“We still have a serious problem in terms of our labor force in the U.S., even though we’re moving toward full employment,” Nickelsburg said. “And it happens to be the older segment of our labor force, those who are coming out of traditional manufacturing.”

Nickelsburg said the slow economic recovery has led to a more stable economy, one without the kinds of financial “imbalances, either in housing or automobiles or in other sectors, that typically lead to recession.” He said that the longest expansion in U.S. history was 11 years, and the country could match that mark if the recovery continues on its steady course.

“For the next couple of years, things are looking pretty good,” he said, adding that there are no obvious domestic signs of another recession in the near future.

Bucking a national trend that is seeing a contraction in nondurable goods manufacturing, Sonoma County is experiencing growth primarily driven by sectors like wine, beer and specialty foods.

Housing price appreciation has leveled off, Nickelsburg said, and nominal home prices are about where they were in 2004. “That means that an investment in housing in 2004 paid zero return, and after adjusting for inflation it was negative,” he said. “Those are hardly bubble prices. Given that home price appreciation has slowed, it’s really kind of a return to a normal housing market that we have here in California.”

While residential building has improved, there is a current shift in construction away from single-?family homes to multi-unit housing complexes, which require about one-third fewer construction jobs.

After the meeting, Nickelsburg stressed the importance of preparing youths for the 21st-century economy, as many of the jobs that fell to the recession “are not coming back.”

The annual conference, held at the DoubleTree Hotel in Rohnert Park, highlights key opportunities, challenges and initiatives facing Sonoma County in the coming year.

You can reach Staff Writer Martin Espinoza at 521-5213 or martin.espinoza@pressdemocrat.com. On Twitter @renofish.