Research: Central California’s economy poised for strong growth
STOCKTON…July 26, 2006 8:18am
‘High growth’ sectors identified
Construction jobs growth to slow
The California economy will continue to see robust growth from 2006 to 2008, with Gross Domestic Product expected to expand an average rate of 5.9 percent over the period, according to the quarterly state and regional forecast released Wednesday by University of the Pacific’s Business Forecasting Center in Stockton. (Download Report)
While the research does not include all of the Central Valley – Kern, Kings and Tulare counties are not included – the region should see strong growth in the immediate future, it says.
Highlights from the report include:
- Payroll employment forecast to grow at 1.7 percent in 2006 with growth slowing to 1.3 percent by 2008.
- High growth sectors continue to be professional and business services and transportation, warehousing and utility, and education and health services.
- The “housing soufflé” has finished baking and is out of the oven. Housing starts peaked in 2005 and begin to fall off in 2006-08, as mortgage rates rise to over 7.00 percent by 2008.
“The housing soufflé peaked in 2005,” writes the report’s author, Sean Snaith. “This is true in terms of housing starts as well as price appreciation. It is now out of the oven and cooling significantly. Housing starts will fall off in 2006 as mortgage rates continue their orderly climb. Developers are coming to terms with the slowdown in residential real estate and will be scaling back their projects in response to rising inventories and waning demand.”
For major cities in the Central Valley, Mr. Snaith has a positive outlook.
“Personal income in Fresno is predicted to grow an average 5.6 percent per year through 2009, comparable to the state’s 5.5 percent average growth. Employment is expected to grow strong in 2006, then gradually slow but remain solid through 2009, registering an overall average growth of 1.8 percent per year from 2006 through 2009,” he writes.
“The construction sector will finish strong in 2006, registering an 8.3 percent job growth, the strongest in the region,” he says. “The sector, however, is expected to slow considerably in the following years.”
Other job sectors, except “federal government” and “financial activities” will experience steady and positive job growth through 2009, according to the report.
Modesto’s total personal income is predicted to grow an average of 6 percent per year between 2006 and 2009, says the Pacific report.
“While this is slower than the 7 percent growth in 2005, it is still stronger than the state’s 5.5 percent growth rate,” the report says. The region’s economy is predicted to experience strong job growth of 2.8 percent in 2006, fueled by the strong performance in its three largest sectors: Trade, transportation, and utilities; state and local government; and manufacturing.
Population growth in Modesto is predicted to stabilize in 2006, hovering around 1.6 percent through 2009. The unemployment rate is expected to decline from 8.3 percent in 2005 to 7.4 percent in 2006, and will remain at about that same level through 2009, the report says.
Personal income growth in the Stockton-Lodi region will finish 2006 at 6.4, Mr. Snaith says. Growth is expected to slow in the following years to average 5.6 percent through 2009, comparable to the state’s 5.5 percent growth.
“Stockton has enjoyed strong and steady job growth since at least 1998, and will see 2.6 percent job growth in 2006, the highest growth in four years. The economy, however, will slow after 2006 but will remain solid, posting an average job growth of 1.7 percent through 2009,” he writes. “The primary drivers of the region’s economic growth have been the construction and all the services sectors, which in 2006 grew at rates ranging from 2.7 percent to 7.3 percent.”
After peaking at 11.7 percent in 2004, personal income growth in Merced is expected to gradually decline and will average 5.6 percent per year between 2006 and 2009, which is about the same as the state’s 5.5 percent average growth, the Pacific report says.
“Fueling the 2006 economy is the strong performance by the three largest sectors in the region: State and local government; trade, transportation, and utilities; and manufacturing sectors, which post job growth of 6.1 percent, 5.2 percent, and 1.6 percent, respectively.”
Driven by strong performance in high paying sectors, personal income in the Sacramento region has grown strong since 2004, the report says. It is expected to continue to grow and average 6.5 percent per year between 2006 and 2009, far outpacing the state’s 5.5 percent growth rate, says Mr. Snaith.
“The economy is predicted to slow after 2006, but job growth will remain significant, averaging 1.7 percent per year from 2007 to 2009,” he says. “Upholding the economy after 2006 are decelerating but still solid construction sector, steadily growing, various services sectors, and state and local government sectors. On the flip side, manufacturing sector is predicted to slow considerably with its annual job growth falling from 3.6 percent in 2005 and 2006 to zero growth between 2007 and 2009.”
Download the 2006 California & Metro Forecast PDF
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