MEDIA RELEASE
San Fernando Valley Businesses Optimistic About the Future, Despite
Concerns about the Current Economic Downturn, CSUN Researchers Say
(NORTHRIDGE, Calif., May 8, 2008) — San Fernando Valley business owners are cautiously optimistic about the future despite very real concerns about the current economic downturn, according to a new report by researchers with Cal State Northridge’s San Fernando Valley Economic Research Center.
The "CSUN San Fernando Valley Economic Report," which examines the state of the economy in the region, was presented today at the San Fernando Valley Economic Summit at the Sheraton Universal Hotel in Universal City. The summit is sponsored by the Economic Alliance of the San Fernando Valley and Cal State Northridge.
"The key industry survey responses paint a clear ‘good news, bad news’ picture for the Valley’s economy," said CSUN economist Daniel Blake, director of the center. "The bad news concerns the significant economic drag from the malaise in the local real estate, financing, construction and retail sectors. The good news is that the Valley’s key sectors—those which determine longer-run growth prospects——expect respectable growth in sales and employment by the end of 2008 and into 2009."
This year’s annual report has shifted focus slightly from the traditional forecasts given in past years because new state data security measures mean that some information collected in the past is no longer available for assessment.
"Our forecast was based on a model of the Valley’s economy that used local employment data plus Los Angeles County and California economic forecasts," Blake said. "The required employment data are no longer available due to new data security measures in force at the California Employment Development Department and the Bureau of Labor Statistics. So, beginning this year, our sole indicator for the employment and business outlook for the San Fernando Valley rests on the results of the 2008 Forecast Survey."
Data on other indicators, such as bankruptcies and real estate, is available, and together with the results of the survey make up the report.
The report also includes extensive data on the general, social, economic and housing characteristics of Valley residents. These characteristics include information about labor force participation, commuting, employment, education, language and median household income—$53,500 in 2006—among others.
Moreover, the report displays this information for the San Fernando Valley County Census District (CCD) and for 15 regions within the Valley. This information comes from a special tabulation of the 2006 American Community Survey by the U.S. Census Bureau. Because space limited the residents’ characteristics that could be highlighted in the report, even more data is available at the center’s Web site www.csun.edu/sfvec.
The 2008 Economic Forecast Survey of Valley Businesses asked business people to identify the most pressing issues for businesses in the Valley and polled them on trends in competition, employment, sales and costs. In response to the question about the "most pressing issues" that Valley businesses face now, the answer was the state of the economy.
"The overwhelming response was that the economic downturn in the Valley and elsewhere is hurting Valley business," Blake said. Despite those concerns, the survey results indicate that most key industry Valley companies—about 60 percent—expect their sales to increase in 2008, compared to 57 percent in 2007.
But caution is a key word for much of the analysis of the various aspects of the Valley’s economy, bankruptcies for example. Chapter 7, 11 and 13 bankruptcy filings all began trending upward in 2007.
"Whether the upward trend is a move back to a ‘normal’ level after an easy credit period or a reaction to a slowing economy remains to be seen," Blake said.
He said an analysis of unemployment claims "seem to be portending a slowing local economy" as their numbers failed to drop in the fourth quarter of 2007, interrupting the normal pattern and signaling rising unemployment in a seasonably adjusted sense.
Another indicator of the slowing economy is the condition of real estate in the San Fernando Valley. During the height of the real estate bubble, Valley home prices rose at double digit rates "and are now coming down at double digit rates," Blake said. Home sales are at all-time lows. At the same time, he said, foreclosures are soaring and threatening to go higher.
Valley rental properties, on the other hand, are sending mixed signals. Vacancy rates have climbed in comparison to recent levels, and Valley rent increases that had tracked under five percent annually for four years rose in 2006 and 2007, but then dropped back in 2008.
Overall Valley residential construction permit activity dropped 4.4 percent in 2007, bringing the "construction slowdown" to the San Fernando Valley, Blake said.
Residential construction slid 17 percent in 2007, reversing years of increasing residential permitting. Meanwhile, non-residential construction soared 21.7 percent to a record level, "undoubtedly in response to the industrial- and office-space crunch during the last few years," Blake said.
"Right now, the Valley’s eyes are on the negotiations between the studios and actors’ unions, hoping for a quick and mutually beneficial conclusion to those talks," he said. "Given the slow recovery from the recent writers’ strike, the outcome of the current talks may determine how soon the Valley’s economy goes into recovery mode."
A copy of the full report is available at CSUN’s San Fernando Valley Economic Research Center’s Web site: www.csun.edu/sfverc.