Thursday, October 9, 2008

Sacrametno County drags behind U.S. in personal income growth

Sacrametno County drags behind U.S. in personal income growth
Housing crisis blamed for region’s per-capita income ranking 77th in nation
Sacramento Business Journal - by Kathy Robertson Staff writer
Friday, September 26, 2008

Matt Lemos earned $80,000 a year as a customer relations manager at Pulte Homes Inc. when he was laid off in June 2007.

This year, he expects to make $20,000 to $30,000 less from two companies he started using his landscaping background and development contacts.

Lemos is not alone. Personal income growth slowed in 2007 in most U.S. metropolitan areas, but Greater Sacramento fared worse than the national average, according to estimates released last month by the U.S. Bureau of Economic Analysis.

“California is bearing a larger brunt of what started as the housing crisis,” said Suzanne O’Keefe, an economist with the Sacramento Regional Research Institute. “And we seem to be losing jobs in more and more sectors as the time passes.”

The Sacramento region had an estimated 903,800 wage and salary jobs in August, down 4,500 in a month and 9,900 from August 2007. Sacramento County, where the area’s jobs and population are concentrated, had an estimated 651,800 jobs, down 2,800 in a month and 1,500 from August 2007.

“Retail trade and manufacturing weren’t hurt initially, but now there’s spillover,” O’Keefe said. “And every time someone loses a job, they are able to spend less, which means someone else’s job is at risk.”

While government employment enjoyed a steady uptick in recent years, the state budget crisis took a heavy toll last month. Government employment declined by 4,300 jobs in the Sacramento region — 96 percent of the net total. State government jobs took the biggest hit, with a drop of 2,700 jobs.

Unemployment in the four-county metro area was 7.4 percent in August without adjustments for seasonal hiring — and 7.7 percent for Sacramento County, where 54,300 people were out of work.

All these factors affect consumer confidence, said Barbara Hayes, executive director at the Sacramento Area Commerce and Trade Organization.

“People hold onto their money a little longer and save a little more, but you have to remember this cycle comes off one with huge consumer spending,” Hayes said. “It’s down, but that’s relative. It’s coming off highs in construction and retail.”

Per capita income under par
Total earnings grew 5.5 percent last year in the four-county Sacramento metropolitan area, down from 6.3 percent growth in 2006. Average growth in metro areas nationwide was 6.2 percent, down from 6.8 percent in 2006.

Per capita personal income in the region was $38,570, ranking Sacramento 77th out of 360 metro areas in the nation, according to preliminary estimates. That figure was $37,078 in 2006 and $35,318 in 2005.

Average per capita income in metro areas nationwide was $40,536; it was $38,632 for the nation as a whole.

The bureau tracks per capita personal income as well as total personal income for each metro area to separate the effects of population growth or decline. For example, a metro area could see total income rise as more people move to the area and find work, but each worker might see the same amount of money, so per capita income would be unchanged.

Work the contacts
In an era when dual-income households are the norm, median household income in Sacramento County rose 5.6 percent in 2007, an acceleration of the 4.1 percent increase between 2005 and 2006. That suggests local families are maintaining stability but might be depending more than ever on the income of two working adults.

Despite a dip in pay, Lemos and his family haven’t had to change their lifestyle. They went on vacation to New York City this summer and will go to Disneyland in December.

Lemos is married to a teacher. The family is saving money on day-care expenses because he’s now a self-employed 39-year-old dad with a schedule that’s flexible enough to work around the kids’ school schedules.

He tried to get out of the construction/homebuilding industry after he was laid off, but had no luck.

Lemos worked for an area landscaping company before he was hired by Del Webb Corp. in 1995 as a construction landscape superintendent. He was promoted to the company’s design studio eight years later and stayed on following the merger with Pulte in 2001. He was a senior customer relations manager when he was laid off in June 2007.

“I didn’t want to be tied to one particular industry,” Lemos said. “I’m not sure whether I didn’t work hard enough, or didn’t qualify, but it didn’t work, and I went back to my fail safe: landscaping. People were always asking me to do their houses.”

He got a contractor’s license, took the state test and started Lemos Landscaping in March. He now has two employees.

Another Lemos venture, Home Complete, was started in late 2007 in an effort to tap longtime relationships with construction trades he knew from the homebuilding business. The company provides referral services to new homeowners.

“Knowing people in the industry helps,” Lemos said. “And networking inside the industry saves advertising costs.”

Manufacturing down, health care up
Although much is made of the home-building slump in Greater Sacramento, the biggest earnings drop last year came in manufacturing.

Wages generated by the industry dropped almost 20 percent, to $3.28 billion in 2007 from $4.1 billion in 2006 (see chart).

Earnings from the real estate rental and leasing industry declined 8.6 percent; retail trade 1 percent.

The biggest increase came from the health care and social assistance sector, where compensation increased more than 10 percent. Construction had a slight uptick of 1 percent.

Government remains the big — and stable, so far — industry in Greater Sacramento. Government and government enterprises generated local earnings of almost $17.4 billion in 2007, up 7.9 percent from almost $16 billion in 2006.

An ongoing state budget crisis could change that over the long haul, but the compensation continues to be stable and growing.

The drop in state government jobs last month might suggest hard times to come. The final budget signed Tuesday by Gov. Schwarzenegger does little to change the fact that California spends more than it earns.

“Long-term instability of revenue and expenses cannot be sustained,” O’Keefe said. “We see the same problems year after year. We’ll (eventually) run out of accounting tricks and face pending cuts or higher taxes.”

City officials are anxiously watching the numbers.

The private sector booms — and goes bust — faster than public work, but government generates almost a quarter of local earnings. Declines in what has been a stable work force will be felt throughout the local economy.

The housing spike and drop hit hard. Retail sales are off, and developers who used to fund projects on their own are asking if the city has redevelopment money to sweeten the pot because lending is so tight.

“That’s horrible for the city. We have very finite redevelopment funds available for small areas and are mostly tapped out,” said Sacramento redevelopment director David Spaur.

“Where is this going?” he asked. “We’re nervous.”

SACTO’s Hayes remains optimistic.

“Despite all these freezes and cuts, I keep seeing more people picked up by the state,” she said. “Like many companies, government closes field offices and brings people close to home — but we benefit from that.” | 916-558-7869