Monday, April 1, 2013

Economist: Solano out of recession yet faces regional challenges

Economist says job training needed

By Gary Quackenbush, Special to the Business Journal
FAIRFIELD — Solano County is enjoying a resurgence in jobs and taxable sales, but high home foreclosure rates and indications of job importation are among regional improvements needed for the local economy fully to rebound, an economist said Thursday.

Sandy Person and Robert Eyler
Sandy Person and Robert Eyler

“Solano County is continuing to recover, evidenced by the rise in job growth since 2010,” Robert Eyler, Ph.D., said of the newly released 2012 Solano County Index of Economic and Community Progress. “At the same time, taxable sales are up, which is also true across California, but employment is not keeping pace with the size of the available labor force. Nonemployer growth indicates that small businesses are back in the game.”

Local employment hit bottom in 2010, according to Dr. Eyler of Petaluma-based Economics and Analysis and Sonoma State University. Since 2010, private industry in Solano has added back 4,200 jobs, but government cut 1,333 jobs.

“The net effect of these current (national government) revenue issues on local city budgets has yet to be seen, but federal and state reactions to these budget issues will take some toll,” he said.

“Nonemployers” — typically, the self-employed — numbered 20,689 in 2010, up from 20,544 in 2009 but down from 21,730 in 2007 and back to the same level as in 2008, according to the latest Census Bureau data compiled from tax returns.

The county of Solano released the 2012 index last week (, and it was the framework for Dr. Eyler’s keynote analysis at a morning briefing sponsored by Solano Economic Development Corporation.

The index points to signs of economic recovery, while other indicators are still reeling from the recession six years ago, according to Sandy Person, SEDCorp president.

Economic progress in Solano is based on the synchronization financial, labor and goods and services markets, according to Dr. Eyler.

“In Solano County, there is growth in the region now after lags caused by labor, income and housing issues,” he said. “This push-and-pull cycle is affecting California overall. Foreclosure rates in Solano are still relatively high.”

While Solano is emerging from recession, it still faces regional challenges, Dr. Eyler said.

“Community progress is based on specific changes in population and demography, education, health care, housing and government resources,” he said. “These factors are naturally linked.”

An aging population is pressuring labor and housing, with home downsizing helping only certain industries, he noted.

“Aging is a significant issue in Solano as well as California,” Dr. Eyler said. “Standard-of-living changes affect the aging and lower-income populations in the county. What happens if California becomes a retirement state?”

Fewer local options for workers implies more labor is being imported, while some residents have to look for employment outside the county, he observed. As the region continues to export products and import labor, this trend is affecting local housing markets — resulting in the median home price falling to more affordable levels.

“There is a jobs and skills mismatch, and the breach is getting wider,” Dr. Eyler said. “The challenge is reconsidering how we educate people for higher-paying jobs.”

Solano County jobs vs job growth - January 2000-January 2013
Solano County jobs vs job growth, January 2003–January 2013 (click to enlarge)

From 2000 to 2012, Solano County had a net gain of 4,367 jobs within local firms, along with a 28.3 percent increase in the gross domestic product and a 3.6 percent per capita income increase, according to the 2012 index report. But median household income declined 9.7 percent from 2000 to 2012.

The number of unemployed in the county more than doubled since 2000. The worst of the decline occurred in the peak recession years — 2006–2010 — due to the local housing market collapse, and when local firms cut 12,000 jobs and private industry GDP shrank by 4 percent.

During this period, per-capita income declined 6.8 percent, taxable sales and assessed property values fell by a quarter, and foreclosure figures were breaking records, according to the report.

In December, the seasonally adjusted unemployment rate for Solano dropped to 9.6 percent, down from 12.2 percent in December 2010, resulting in 7,050 more residents employed. Overall, 5.8 percent more Solano residents were employed in 2012 than in 2000, and over the last year the county added nearly 2,800 more.

Solano had bright spots amid recession. Seven local industry sectors had GDP growth, and five experienced job gains. Health care dominated GDP and job growth.

Remaining local challenges threaten the economy, Dr. Eyler said. For example, foreclosure rates aren’t dropping as quickly as most would like.

“There is also a need to provide a pipeline for new workers,” Dr. Eyler said. “The education data point on the trend toward more imported labor indicates a need for better job training.”

Though the Solano high school dropout rate has edged downward, so too, has the local proportion eligible to attend University of Southern California and University of California compared with statewide figures, he noted.