Wednesday, July 18 , 2018, 8:12 am | Overcast 65º



Economists Forecast Flat-Out Recovery Ahead, But a Slow One

At Radius Group conference, analysts say double-dip recession unlikely but pace of rebound uncertain

Although consumers are cautious when pulling out their wallets, they shouldn’t be afraid of another economic relapse, Mark Schniepp, director of the California Economic Forecast, told a gathering of Santa Barbara business and civic leaders.

“The bottom line is it’s delusional to think we’re going to have a double-dip recession,” said Schniepp, who pointed to the 1991 and 2001 recessions to indicate that a pause in the business cycle is a common theme.

The current pause, however, has left many investors uncertain, and Schniepp cited as reasons a national unemployment rate of nearly 10 percent, minimal job creation, a record low in real estate investment, California’s budget problems and tight credit.

Seeking answers to their questions about the lingering economic concerns, 300 people turned out for the Radius Group 2010 Santa Barbara County Real Estate and Economic Outlook on Thursday at Fess Parker’s DoubleTree Resort.

Some of their worry may be unnecessary, according to Schniepp.

The unwinding of federal census jobs has been driving up recent unemployment, but Schniepp said private-sector job layoffs have ended. In fact, since the beginning of this year, the private sector has created 763,000 jobs in the U.S. economy, a pace faster than after the previous two recessions.

“You will see greater growth, and more job creation, because private-sector job creation has come back,” he said. “But we need to work our way through the public-sector job loss that is coming now.”

The economy is not going to quickly right itself, Schniepp said. While it is staged to continue its recovery, it is likely to remain fairly flat for some time. He said it is unlikely that the labor market will show much improvement by the end of this year and into early 2011. He cited the gradual increase of GDP, which isn’t rising fast enough to offset unemployment.

The housing market is also seeing gradual increases. Although home sales haven’t increased during a time with the lowest financing rates ever and have possibly “bottomed out,” Schniepp predicted it will bounce back because of low mortgage rates, loosening credit and the restoration of buyer confidence.

“Right now, we aren’t seeing a lot of vibrancy in the housing market,” Schniepp said. “But both are increasing very slowly.”

Personal saving rates and increased corporate productivity can result in more immediate impact. Saving rates are up six times from two years ago, and big corporate profits are at an all-time high. If people have the confidence to spend, Santa Barbara County can quicken its recovery, Schniepp said.

“Remain confident, stay calm, believe that the economy has the ability to correct on its own,” he said.

The fate of Santa Barbara County, Schniepp said, depends on the pace of nationwide recovery. Local unemployment rates remain at 9.2 percent, which will remain high because of public-sector layoffs. He said government spending habits — at all levels — will take “years to reconcile” because government spending is at an all-time high.

One speaker, James Goldberg of Goldberg Investment Advisors, took it further, noting 60 percent of federal budget spending goes toward entitlements.

“The shoe hasn’t dropped, but when it does some state will default because of pension allocations,” he said.

The county’s economic well-being also relies heavily on its commercial real estate. Vacancy rates remain high for office and industrial space on the South Coast, standing at 10 percent largely as a result of the loss of 12,500 jobs over the past three years, or 7.2 percent of total employment, said Brian Johnson, general manager of Radius Group.

Santa Barbara’s retail sector is better than average, but that isn’t saying much. Average lease rates have declined to their lowest level since 2006 in the city of Santa Barbara and vacancy rates have risen 40 percent since this time last year.

It’s still a buyer’s market, however, and the time to buy is now, Schniepp said.

“All the downward trends are over,” he said. “If you can acquire or invest, this would be the window.”

Radius Group, a 14-agent, privately held commercial real estate company, was founded in 2002 and has sponsored the Santa Barbara County Real Estate and Economic Outlook since 2008. Co-sponsors were Bartlett, Pringle & Wolf; Business First Bank; MeridianGroup; and Reicker, Pfau, Pyle & McRoy.

Noozhawk intern Alex Kacik is a graduate of Cal Poly, San Luis Obispo. He can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk or @NoozhawkNews.

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