CLU Conference Presents Dueling Economists

By Dawn Dyer, Dyer Sheehan Group, Inc.

Two well respected economic experts shared the podium at the March 29th seminar hosted by California Lutheran University, but that’s about all they had in common. Dr. Bill Watkins, the Executive Director of CLU’s Center for Economic Research & Forecasting, was fairly pessimistic about the outlook for economic growth in Ventura County; while Dr. Mark Schniepp, Director of the California Economic Forecast was more optimistic regarding the area’s prospects for the future.

Watkins cited data indicating significant job loss in the county, and sees Amgen, the deep sea Port of Hueneme and Naval Base Ventura County as drags on the area’s economic engine; the same employers that once led the region on a path to prosperity. At the national level, Watkins said that bank charge offs have improved, but they are still too high; and that the homeownership rate, consumer debt, and long term unemployment are all still well above healthy levels. 

California is lagging the nation in recovering from the recession as evidenced by weak job growth, and significant negative domestic migration. Dr. Watkins referenced the state’s long-standing structural budget deficit, tight regulations, and slow growth policies as key factors that have inhibited economic activity in the Golden State. In particular, he called out California’s climate change legislation AB 32, the Global Warming Solutions Act of 2006, as a law that inhibits economic growth in the state, with no real benefit. 

AB 32 requires the CA Air Resources Board to develop regulations and market mechanisms to reduce California’s greenhouse gas emissions to their 1990 levels by 2020 (a 25% reduction), with mandatory caps beginning in 2012 for significant emissions sources. 

Since California already has some of the most stringent environmental standards in the world, and given the costs of realizing significant additional GHG reductions, he predicted that AB 32 implementation will simply force employers to relocate to other states or countries, with less regulation. 

Dr. Schniepp’s assessment was much more encouraging. Since November, he said, there has been improvement at the national level in consumer sentiment, consumer spending, job growth, and even positive sentiment expressed in the most recent poll of the National Association of Home Builders.

In California, Schniepp reported, the labor markets created 330,000 new jobs in the past 24 months, virtually all in the private sector, and the state’s unemployment rate has declined sharply. Exports reached record levels in 2011. He observed that the state’s foreclosure rate is the lowest in years, and with virtually no homes built in recent years, he predicts that housing production will rebound slightly in 2012 and improve more dramatically in 2013, when home prices are also expected to rise.

While Dr. Schniepp conceded that job growth in Ventura County is at the slowest rate in Southern California, he touts the 4,100 jobs created during the last 24 months as evidence that the local economy has turned the corner and is picking up steam. Ventura County’s unemployment rate is dropping, said Schniepp, which means jobs are being created somewhere, and the county’s labor force is at an “all time high”. 

While professional services and hospitality/leisure sectors will lead in job creation; he believes hi-tech, logistics and scientific services also hold great promise. Schniepp predicted that there will be a need for 9,100 new housing units in the county over the next five years.

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