On May 10th, I attended the 2018 Spring Economic Forecast at the DoubleTree Hotel in Rohnert Park. Nearly 500 attendees from public, private and nonprofit sectors attended the breakfast.
The keynote speaker was Dr. Steven Cochrane, the Managing Director of Moody’s Analytics, who focused on global growth, rate hikes, income growth, and the job market.
Attendees learned details about Strategic Sonoma, the newly completed five-year strategic plan for our local economy. It addresses some of our region’s most pressing problems around workforce, economic resilience, innovation and entrepreneurship, and economic inclusion for all Sonoma County’s residents. The plan also includes a short-term 6-12 month recovery plan that was developed in the wake of the October 2017 fires as part of the Board of Supervisor’s recovery plan.
The good news is that Sonoma County and the nation will enjoy continued economic growth this year, but high housing costs and a shortage of workers in northern California threaten future prosperity.
Dr. Cochrane said the two challenges will remain as the workforce gets older and fewer people move into the county.
At the breakfast, three local business leaders labeled the lack of available workers a looming crisis in such areas as construction and manufacturing. As a response, educators and volunteers are teaching high school students basic construction skills. Others are offering hands-on training in design and manufacturing techniques taken from the do-it-yourself enthusiasts who belong to the maker movement.
The three speakers urged the community to get involved in preparing a new generation of workers and entrepreneurs who aren’t bound for four-year colleges. Pat Harper, a Vice President at Keysight Technologies in Santa Rosa, said he recognizes the need because most of the 600 workers in his local manufacturing division will soon be eligible for retirement.
Here are some of the key takeaways:
The good.
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Moody Analytics is forecasting GDP growth of about 2 percent this year; Dr. Cochrane expected the county would enjoy slightly higher growth than that
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Income growth will rise; global growth is strong
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First time in 25 years that we are without any major country in recession
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All European countries are in recovery
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Federal fiscal policy is adding extra “juice” to our economy; the tax cuts will result in 1% growth to the economy
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We should expect to have a couple of good years of economic growth; however, this will change in 2020 when fiscal policies change which will result in higher interest rates
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Across the U.S., job openings have reached a record high; the demand for workers is driving wage growth, which in Sonoma County is increasing “at its fastest rate in quite some time”
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Consumer spending is expected to be strong
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Household balance sheets are strong
The bad.
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Workers are hard to find; the county unemployment rate dipped to 3.6 percent in March, a level Cochrane expects will fall further in coming months
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County economic officials on Friday estimated that 50,000 employees, roughly a quarter of the county workforce, will retire over the next decade
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Migration in to the county remains relatively low, partly due to the high cost of housing
Larry Florin, the CEO of Burbank Housing, shared a few “not-so-fun” facts:
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Renters in Sonoma County must make $44/hour to afford housing
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On average, 55% of income is spent on rent
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Poverty increases from 9% to 18% if you include housing costs
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12,000 people are on their waiting list for affordable housing; the reaction from the government was a reduced spending budget by 89%
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The median home price in Sonoma County is $670,000
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For every 5 construction works retiring, only 1 new construction work is entering our workforce
In conclusion, local business leaders must become more heavily involved in the campaign for new housing, which will affect their ability to attract top talent; Sonoma County will need new and innovative strategies to build at least 25,000 – 30,000 housing units over the next five years for the local economy to keep pace in the aftermath of last year’s fires; retaining workforce will be critical; and we need to do everything we can to support our local economy.
To learn more about Strategic Sonoma, visit: https://www.strategicsonoma.com
To download Dr. Cochrane’s presentation, visit: http://sonomaedb.org/Calendar/2018-Spring-Economic-Forecast/
My next post will be focused on housing and updates from David Guhin, Assistant City Manager and the Director of Planning and Economic Development.
Thanks for reading!
Carissa Abazia
@CarissaMortgage