A bimonthly economic report by a local think tank showed San Diego declining in four out of five economic activity indicators, including residential construction, new business license applications, the local labor force and consumer confidence.
Released earlier this week by the San Diego Institute for Policy Research, a nonpartisan but right-leaning think tank, the report, called the "San Diego Economic Ledger," demonstrated an overall strong local economy but contains warning signs.
The San Diego stock index showed the one positive indicator for the month of February, with a 5.9 percent increase from the month before. The index, however, remains 1.1 percent lower than in February 2006.
“Overall San Diego’s economy is doing fairly well, but there’s definitely a slowdown,” said Kelly Cunningham, senior fellow economist with SDI. “We thought it was important just to be aware.”
The report indicated San Diego’s residential construction market was of particular concern, showing significant slowing, falling from a record $3.9 billion in building valuation during 2004, down 8.1 percent in 2005 and another 30.6 percent in 2006. This made for a total drop of $1.4 billion in value of construction activity.
New business licenses showed the worst slump, with the seasonal adjustment revealing a 40 percent drop in the total number of new licenses for February and a 27 percent decline over the year. Overall, the number of new business licenses has fallen to its lowest level since March 2002.
The San Diego Economic Ledger introduced the San Diego Economic Consumer Confidence Index, a tool developed by SDI and Competitive Edge Research and Communication to measure the current and prospective economic outlook of San Diego citizens. The findings are based on a random sample of approximately 500 San Diego residents, and they measure San Diegans’ attitudes toward both the local economy and their personal financial situation.
According to Cunningham, the survey demonstrates a 9.2 percent decrease in consumer confidence from January to March.
The consumer confidence index measures San Diegans’ opinion of personal financial well-being, as well as the outlook of local business and economic conditions. Questions frame consumer outlook for both current conditions and expectations six months into the future, thus allowing SDI economists to forecast future economic activity as well as measure the correlation of expectations with actual economic outcomes.
“The overall index reveals consumers on the whole are more positive of future expectations," Cunningham said, "but there is a noticeable decline, especially as to local consumers’ confidence for future expectations."
The fifth major economic indicator is unemployment, and San Diego remained steady in the category. However, the local labor force decreased in February to levels similar to those of 1993, a year the United States was mired in a deep recession. Cunningham said there is usually a decrease in labor in January after the holiday season, but those numbers tend to rebound in February. This year they did not. He said that could be another result of people leaving the San Diego area due to the high cost of living.
San Diego’s economy has proven to be a bellwether for all of California in recent years, Cunningham said, with the state’s other large metropolitan areas such as Los Angeles, Orange County and the Bay Area often following suit in trends like job growth. While the numbers for the local region are not dire, Cunningham said analysts and policymakers statewide should take notice.
“I think San Diego in some ways is leading the state," he said, "and this seems to be a cautionary (set of numbers)."
