Thursday, January 08, 2009

Report: Sacramento Headed for Double-Digit Unemployment in 2009

From the Sacramento Bee:

A new forecast says unemployment will hit 10 percent in Sacramento this year [a rate worse than anything from the 1990s recession]. That's the most striking finding from the premiere issue of the Sacramento Business Review....The review also says the Sacramento region can expect to lose 14,500 jobs in the first quarter of 2009 alone. By contrast, the region lost 12,700 jobs in the 12 months ending in November.
From the Sacramento Business Review report [pdf]:
Construction...has become the largest production input in Sacramento since 2000 and hit its peak in 2005. Currently, construction contributes to 56% of Sacramento’s goods production input. We view this larger exposure to real estate as one reason the region was hit particularly hard by the housing collapse, partially offset by the larger exposure to the relatively stable government sector...By the end of 2005 - coinciding with the peak of the residential market - 26% of all jobs in the region were real estate related. Since that time the real estate sector has steadily lost jobs and now represents only 22% of overall employment.
While this U.S. recession officially began in December 2007, we believe the Sacramento region felt the economic effects earlier given the region’s large exposure to housing price declines, and the collapse in construction and in real-estate related financing activities. Using unemployment and taxable sales as a gauge, Sacramento was likely in its own local “recession” as early as 2Q07. Given our negative outlook, we would be looking closer to the end of 2009 or early 2010 for a local recovery and job growth to return, but we also believe there is a greater risk that a recovery occurs later than this rather than earlier.
While a recovery is at least a year (or two) away, it is likely we will reach or approach the bottom of the [real estate] downturn by the end of 2009. The local residential market is further along in the cycle than most the rest of the country, having already incurred a significant correction in pricing. As such, we expect the Sacramento region to be one of the first markets to recover. However, whether we reach the bottom soon and how long we remain there is dependent on how quickly the credit markets thaw and the depth and duration of the current economic recession.
[I]n the state's capitol of Sacramento, which has been one of the states harshest hit areas, the increase in foreclosure sales is also helping to boost the ailing home market. The real estate crisis is forecast to deflate home values in Sacramento another 15.7% by year's end.
From News10:
City employees in Lincoln are bracing for layoff notices that could come as early as Friday, according to Mayor Spencer Short..."I think everyone saw the slowdown coming but it was just a sudden collapse because of the mortgage crisis and everything else," said Short.
From the SF Chron:
"My policy prescription: Let them get foreclosed on," [economist Christopher Thornberg] said. "The home market is not going to recover, on the building or appreciation side, until two things happen: a) all these people with dodgy mortgages who bought things they couldn't afford get shoved out and b) all those homes get absorbed. The fastest way to do both of those things is to let prices fall."


Jacob said...

My policy prescription: Let them get foreclosed on...

Wow, I actually agree with an economist. Strange, I don't know how to react.

anon1137 said...

I nominate Christopher Thornberg for Fed chief.

Cow_tipping said...

SF chronicle - Yea apparently has some common sense. Fast, sharp almost precipitous fall in RE prices will actually start real growth. The fake stimulus crap and artificially preventing foreclosures with loan modifications will not work.

Cow_tipping said...

And if the housing market does not recover by 2015, its 30 more years of declines. Retiring baby boomers. Mostly northern US I think, they will move to the south I believe, but Sac may be still too north.

Diggin Deeper said...

Job loss report came in at 524,000and revisions from previous reports added over 100K more. Unemployment rate now at 7.2% but well over 10% if you count those that have quit looking.

Puts continued pressure on us here. State revenues crumbling and in need some kind of charity funding from the Feds. If 1 in 10 are out of a job in Sacto, RE prices go nowhere and sales will reflect that pressure in the coming months. Job losses for all of '08 pegged at 2.6 million nationwide and it was the largest decline since 1945 when our troops came home.

If we're ramping up now, with future expected losses accelerating, and Obama wants add 2-3 million more, he's behind the curve before he takes the oath.

Cow_tipping said...

Also funny to note, they are all looking like they are blaming the housing collapse on "unemployment, government shortfalls etc".
Isn't that a wonderful case of pinching the baby and then rocking the cradle while saying mosquito bit the baby.

patient renter said...

The local residential market is further along in the cycle than most the rest of the country, having already incurred a significant correction in pricing. As such, we expect the Sacramento region to be one of the first markets to recover.

I understand the bottom calling, but what is it with so many bottom callers thinking recovery will commense immediately after we hit bottom as opposed to the bottom being long and flat? It's way to early to even begin thinking about recovery.

Deflationary Jane said...

"UC Office of the President outlines proposals to curtail freshman enrollment in the fall, freeze the salaries of top administrators and significantly restrict compensation for a large group of senior leadership."

Talk in the hallways is not pretty. We already had folks backing up their office on Monday but declining enrollment is the one thing the city of davis dreads.

bon apetite!