Although Northern California’s economy is poised to continue growing from 2018 – 2020, the region faces challenges of an aging workforce, “brain flight,” and the difficulties of being located in a rural area.
That’s according to the keynote speaker of the “Northstate Economic Forecast Conference” hosted this week by the Center for Economic Development at Cal State Chico. There’s nothing to suggest a recession will hit the national or state economies over the next three years—but if one transpires, it should be “mild.”
Research presented at the event for Butte, Glenn, Tehama, Shasta and other counties spotlights some intriguing viewpoints, trends and projections so your credit union can plan appropriately:
Northern California Economic Forecast
- (To view the keynote presentation by Sonoma State University Economics Professor Dr. Robert Eyler, click here).
- Most employment categories will add jobs from 2018 – 2020. “Hot” industries include health care, education, and business/professional services. Those in the “moderate” growth range include government, leisure/hospitality, information services, finance, wholesale/retail, transportation and utilities, manufacturing, and farming. Total job employment will rise nearly 5 percent from 2017 – 2022. (Construction is the only sector that will experience a job decline.)
- However, the local economy will expand slower than California and the nation. National Gross Domestic Product (GDP) is expected to post between 1.9 – 2.5 percent growth per year from now into 2020. But for Northern California, an aging population and declining labor force participation rate (the share adults who want to be employed) will be a drag on local growth. Additionally, with economic development projects highly focused in urban or suburban areas across the state, rural Northern California will not feel the positive impact from such initiatives like other regions.
- Local demographic data points will lag in growth compared to the entire state from 2017 – 2022. The local population will expand 3 percent; the number of households by 4 percent; and taxable sales by 2.5 percent. However, registered vehicles will decline 1.5 percent. (California’s rates of growth are all positive and extremely higher in certain categories)
- There are opportunities for greater local economic/business activity. Medical tourism, food and beverage manufacturing, higher crop agriculture activity, and creating an agriculture science hub are some key areas that could be expanded to benefit the region. Also, the region could benefit from focusing on development of infrastructure (internet broadband and air travel consistency), logistics expansion (a hub for transportation), and housing (where new workers will live).
- The cannabis industry is “what to watch” locally in 2018 with the state’s recent passage of legal recreational use. However, there will be a slow transition and rollout due to taxes, regulations, and a focus on larger players in the market. Also, there could be broader challenges for law enforcement officials. Expect some attempts by financial services to “bank” cannabis as some think the issue is headed toward nationalization by sometime between 2020 –2024.
- Northern California will never turn into Silicon Valley, but… The region has more ties to education and what students will do with their education. The “gig economy” is here to stay, locally speaking—and in fact, it’s been here for a while. Also, the continual rapid rise in health care jobs is a silver lining. However, more automation of certain jobs will prove a long-term challenge.
- Areas for credit unions to be on the “look out”—both locally and globally:
- Geopolitics and the bond markets.
- Will the recent congressional tax reform and political saber rattling cause a reduction in U.S. Treasury bond demand?
- Signs of any potential recession include: rising delinquencies; falling spreads between long and short-term interest rates; and increasing “initial claims” for unemployment.
- Mortgage and auto sales growth will start slowing due to interest rate and business cycle changes.
- Long-term questions to ponder are: Will autonomous vehicles reduce household automobile demand? Will interest rates rise so much that demand for homes softens? Will labor markets adjust so the supply of needed workers meets the demand? Will technology make credit union and bank branches labor-obsolete by 2030? What do all these areas mean for hiring and recruiting.
Demographic Profile and Projections: Northern California (4 counties)*
- Total population: 510,000 (and will hit 521,000 by 2025).
- Working-age individuals (15 - 64 years old): 64 percent of total population in 2015 (and will fall to 61 percent by 2025).
- Labor force (at least 16 years old who are working/looking for a job): 217,000 out of 402,000 adult population.
- Labor force participation rate (adults who “want” to work): 54 percent (or 217,000 individuals).
- Unemployment rate: 4.9 percent (versus 4 in CA and 4.1 in U.S.)
- Unemployed workers: 10,700.
- Median household income: $45,000 as of 2016 (compared to $66,600 for CA and $59,000 for U.S.)
- Poverty rate: 19 percent (versus 14.3 in CA and 12.7 in U.S.)
- Education of population: 19 percent have a college degree; 38 percent some college; 28 percent high school diploma; and 15 percent no high school diploma.
- Employment sector growth: click the following links for local future growth breakdowns (2014 – 2024) of nonfarm job projections by industry, occupation, education, and fastest-versus-largest areas of importance: Butte County-Chico region; Glenn-Colusa-Tehama region; and Shasta County.