No Recession, No Easy Times Ahead For City, State Economy

By Kurt Helin
Editor

It’s not technically going to be a recession, but the economy for the next couple of years is not going to be good, either.

That is the forecast of Dr. Joseph P. Magaddino, chairman of the Department of Economics at California State University, Long Beach, and Lisa M. Grobar, director of the Economic Forecast Project. They offered their annual Economic Forecast today (Thursday) at the Long Beach Convention Center.

“There’s no question that we are in for an extended period of slow growth,” Magaddino said. “We don’t have the national economy really growing until the third quarter of 2009.”

While the growth for the next year or so may be very minimal, it will not turn into a reduction of growth for extended financial quarters, or a recession, Magaddino said.

However, he said some factors could change that. One is the price of oil, which is now flirting with $130 a barrel. Magaddino said it should dip back to closer to the mid $90s by the end of the year. If not, that will put much more strain on the economy.

Homeowners may not see the values of their properties shoot up any time soon — after years of double-digit growth many properties saw a 2% decline last year, according to the report. Magaddino noted that coastal areas should start to see a rebound in prices next year.

Long Beach saw some foreclosures in the past year — 754 total according to the report, 541 of which were single-family homes. That accounts for just more than 2% of the city’s total housing market, but it may have accounted for a much higher percentage of the homes available on the market, Magaddino said.

“The good news is that (the foreclosures) are spread out across the city, which is better than all being in one neighborhood, which can mean a downward spiral in that neighborhood,” Magaddino said.

Long Beach and Los Angeles County have not been hit as hard as areas such as Orange or Riverside counties by the housing market problems because the city was built out and there was not much new construction here, Magaddino said. Areas such as the Inland Empire that saw a boom in home building are the areas hit hardest now because they had so many jobs tied to the housing industry, he said. Long Beach has a large financial services sector but it is not as tied to the mortgage industry as most.

For the past couple of these forecasts, Magaddino and Grobar had been calling for a soft landing for the housing market.

“I don’t think any of us understood the extent to which the credit market would seize,” Magaddino said.

Long Beach saw an increase in jobs, but not from the economic driver that is the Port of Long Beach, Magaddino noted. Instead, the growth was in the government sector. And with tight budgets in Sacramento, that may come back to earth some, he said.

“In terms of the port, we actually lost some jobs,” Magaddino said.

The slowing of the American economy has slowed imports from Asia, so cargo through the ports has been largely flat compared to previous years, he said. While exports are up (due to the weak dollar), that has not been enough to generate new jobs in the ports.

What has generated jobs in the ports and region is security for goods — about 12,000 new security jobs in the region, tied to federal government money, Magaddino said.

However, that accounts for less than half of the government job growth, with the rest coming to school districts and colleges, Magaddino said. Those institutions are seeing a severe tightening of the belt in the coming two years, and so many of those job gains likely will be lost.

Overall, like the nation, Long Beach’s growth of 0.6% from last year is well below what it had seen in recent years. Long Beach has about 10,000 business establishments and the average salary is about $48,000.