THE PRESS DEMOCRAT
Published: Friday, June 15, 2012 at 11:55 a.m.
Last Modified: Friday, June 15, 2012 at 5:32 p.m.
Slowly but surely, Sonoma County’s economy is improving, with its core industries poised for growth and its business costs at a two-decade low, an economist told local business leaders Friday.
The $24.4 billion local economy, which shed more than 22,000 jobs during the recession, is on track to replace nearly all of those jobs within five years, according to a new forecast prepared by Moody’s Analytics.
“There’s good reason to think the county is back on its feet,” said Steve Cochrane, managing director of Moody’s Analytics.
The recovery, however, will continue to be slow. Employment will rise just 1.4 percent this year, far slower than the growth during the boom years of the late 1990s. But job creation in Sonoma County is expected to slightly outpace the expansion underway in the rest of the nation, a reversal of the last decade.
“The county really has been a lagging economy for more than 10 years,” Cochrane said Friday to 350 business and government leaders at the Sonoma County Economic Development Board’s annual economic briefing at the Hyatt Vineyard Creek Hotel in Santa Rosa.
He maintained the county economy is more “in balance” after coming out of the deep recession of 2008-09. The wine industry is benefitting from greater demand and less excess inventory. Tech companies are expected to boost gross products by 16 percent this year and the long-term outlook for tourism is positive.
For years, the county was viewed as an expensive place to operate a business, exceeding the nation for such combined business costs as office rents, taxes, energy and labor. But in 2008, a glut of empty office space and lower energy costs helped place the county below the national average for the first time since Moody’s began measuring the differences in such expenses in 1990.
Not surprisingly, county officials said they plan to tout that change as part of their efforts to attract and retain businesses.
Cochrane even sought to take some of the sting out of a May report that placed Sonoma County as the 10th worst place for job growth in the United States.
But Cochrane said the report, by Chapman University professor Joel Kotkin, relied on estimates from the Bureau of Labor Statistics’ payroll survey, which gathers job data from employers. That survey doesn’t count self-employed workers, who are tracked in a household survey conducted by the bureau.
The agency’s data suggest that Sonoma County has a far larger number of self-employed workers than other parts of the country, Cochrane said. Nationwide, the household survey indicates U.S. employment is 10 percent higher than the numbers reported in the payroll survey. But in Sonoma County, the employment numbers in the household survey are about 30 percent higher.
“It really illustrates the entrepreneurial nature of the Sonoma County economy,” he said.
The county’s battered housing market also appears poised for a turnaround. Moody’s forecast that home prices will hit bottom this year, with the median price dropping 3 percent, then begin to ascend. Over the next five years, Moody’s predicts the median price will rise 51 percent, to $487,600, an average of 8.6 percent a year.
That, in turn, will spur construction. Builders are expected to put up more than 8,700 homes and apartment units in Sonoma County over the next five years, more than three times the number during the preceding five years, according to the Moody’s forecast.
Though it has been painful to many families, the county is slowly cleaning up the damage left by the burst of the housing bubble. Since 2010 the amount of delinquent mortgage debt in the county has declined sharply from about $2 billion to $1 billion. That drop occurred mainly because during that time more than 4,200 homeowners lost their properties to foreclosure and another 2,300 surrendered them via short sales, where the home was sold for less than the amount owed on the mortgage.
The biggest risk on the horizon to the county economy involves the debt woes in Europe, Cochrane said. Moody’s isn’t predicting a breakup of the European Union members, but such a split would cause financial problems for both the county and the United States.