As one of the healthiest in the state, San Diego Countyís economy is expected to continue growing in 2018. But local leaders should remain cautious about the regionís business, demographic and geo-political challenges in the year ahead.
That’s according to a keynote speaker who presented at the San Diego Business Journal's “2018 Economic Trends” event hosted earlier this month. The local research presented spotlights some intriguing viewpoints, trends and projections so your credit union can plan appropriately:
San Diego Economic Forecast
- San Diego County’s economy “will do well” in 2018. Drivers of economic growth include the coming expansion of naval industries, future expansion in the biotechnology sector, active and growing travel/entertainment venues, strong exports, and the upcoming monetary impact of Congress’s recently passed tax reform bill. Also helping the local economy is the supposition the United States will experience faster growth in 2018, also assisted by synchronized global expansion of foreign economies for the first time in several years.
- However, there are just as many constraints to growth as there are drivers. These constraints include expensive housing costs, upheaval in the telecommunications sector, the ongoing “limbo” of the North American Free Trade Agreement (NAFTA), rising medical and health care costs, and a work-skills shortage.
- The San Diego metropolitan region will create 24,000 new jobs in 2018. The unemployment rate will remain between 3 and 3.5 percent during most of the year. Wages will be under pressure to rise. However, labor shortages will be a problem for many large corporations, companies and small businesses. (For context, job growth in the San Diego metro region averaged 31,000 annually from 2014 – 2017.) Additionally, California as a whole will add 335,000 new jobs in 2018 (annual growth averaged 400,000 from 2014 – 2017).
- Of particular note is the rising number of ships “homeported” in the San Diego Bay. It’s forecasted that 64 vessels (mostly if not all U.S. Navy ships) will call the bay “home” in 2018, which has steadily risen from 49 vessels in 2015. Each homeported ship brings consumer and business dollars to the local economy.
- Approximately 9,200 homebuilder permits are projected to be issued locally in 2018. This is a good number, but it’s still substantially below the 12,000 needed to match normal population growth—further limiting housing supply. (For context, housing permits averaged 8,800 annually from 2013 – 2017.)
- The median price of a home in San Diego County will surpass its 2006 peak and rise 5 percent in 2018. It ended 2017 at $540,000 and is expected to hit $567,000 by December 2018 (last year the median price jumped 8 percent).
- Pay attention to what happens with Broadcom’s “hostile” $103 billion takeover bid of Qualcomm—a locally-headquartered semiconductor and telecommunications equipment company. The future of Qualcomm as Broadcom pursues its takeover bid (in conjunction with the outcome of NAFTA negotiations by President Donald Trump) are two major uncertainties facing the San Diego region this year.
- National economic indicators are strong and reveal higher growth in 2018 than the past few years. This has local implications for San Diego County:
- U.S. Gross Domestic Product (GDP) will come in at 2.8 percent for 2018 (it has averaged 2.3 percent annually from 2013 – 2017).
- The U.S. unemployment rate (currently 4.1 percent) will drop to 3.8 percent by late 2018.
- The 10-Year Treasury bond yield should hit 3.2 percent by late 2018.
- The Federal Reserve’s “federal funds” short-term interest rate should hit 2.375 percent by late 2018.
- Consumer Price Inflation (CPI)—which is just one way to measure inflation—should come in at 2.1 percent for 2018 (it’s averaged 1.9 percent from 2016 – 2017).
- Recommendations for local business leaders as the 2018 economy takes shape include:
- Study the recent congressional tax reform changes.
- Enhance your company’s cybersecurity protection and policies.
- Explore foreign trade opportunities.
- Take care of your employees in this “tight” labor market.
- Invest in your business.
Demographic Profile and Projections: San Diego County*
- Total population: 3.3 million (and will hit 3.5 million by 2025).
- Working-age individuals (15 - 64 years old): 67 percent of total population in 2015 (and will remain 67 percent by 2025).
- Labor force (at least 16 years old who are working/looking for a job): 1.6 million out of 2.6 million adult population.
- Labor force participation rate (adults who “want” to work): 61 percent (or 1.6 million individuals).
- Unemployment rate: 3.3 percent (versus 4.3 in CA and 4.1 in U.S.)
- Unemployed workers: 51,500.
- Median household income: $67,000 as of 2016 (compared to $66,600 for CA and $59,000 for U.S.)
- Poverty rate: 12.4 percent (versus 14.3 in CA and 12.7 in U.S.)
- Education of population: 36 percent have a college degree; 31 percent some college; 19 percent high school diploma; and 14 percent no high school diploma.
- Employment sector growth: click here for a local future growth breakdown (2014 – 2024) of nonfarm job projections by industry, occupation, education, and fastest-versus-largest areas of importance in the San Diego-Carlsbad metropolitan region.