Economists: Local ’08 doldrums loom

The current crisis in real estate is going to hurt consumer spending, affecting businesses across the Bay Area, according to a first-ever forum on the local, near-term economy.

Consumers using home equity have been spending too much and will have to retrench — creating either a mild downturn or a recession over the course of 2008, with recovery likely for 2009, economists Christopher Thornberg and Jon Haveman of Beacon Economics said at The Bay Area Economic Forecast Series at the Hyatt Regency San Francisco on Tuesday.

In both the mild downturn and recession scenarios, they predicted a drop in payrolls and a rise in unemployment rates, though the latter should not reach 6 percent. The downturn will delay personal income growth and affect local governments because of a drop in taxable sales, Haveman said.

The tourism industry, San Francisco’s largest private-sector economic engine, may also feel a hit because of declining spending, or may turn out well, Haveman added: It all depends on whether foreign visitors lured by the cheap dollar come and supplement decreased local spending. In contrast to the near-term, his long-term prognosis for San Francisco, San Mateo and Marin counties is “extremely good.”

San Francisco’s economic bust of 2001 was made sharper by the terrorist attacks of Sept. 11, 2001, which affected the tourist industry, but that bust didn’t cause housing prices to fall or negatively affect consumer spending, Haveman said. The resulting recovery was remarkable, he said, despite the fact the Bay Area has not fully recovered the 410,000 jobs lost in the three years after 2001.

“Never before in recent U.S. economic history has a region lost so many jobs within such a short period of time, only to recover so fully within three years of the trough,” the economists wrote in their 2007 San Francisco Economic Forecast.

Though DataQuick figures released regularly do not show a drop in home prices in San Francisco, Haveman said, they give a misleading picture because they don’t report the composition of homes being sold, while home prices actually are declining in The City — thus showing that San Francisco is not immune to national trends.

A fall in consumer spending is an issue here as in other parts of the country. Other economic risks are the possible hit to tourism, the vulnerability of The City’s important financial sector to the credit crisis, and impacts to commercial real estate if rents don’t match the high prices investors paid for the buildings in recent years.

Two predictions

Recession scenario

» San Francisco, San Mateo, Marin counties nonfarm payrolls shrink in 2008 and 2009

» Unemployment peaks at 5.6 percent

» Personal income increases through 2008, but drops slightly in 2009

» Taxable sales drop in San Francisco and San Mateo county in 2008

Soft-landing scenario:

» San Francisco, San Mateo, Marin counties nonfarm payrolls shrink throughout 2008 and 2009, but at a lower rate

» Unemployment peaks at 4.25 percent

» Personal income increases through 2009

» Taxable sales drop in San Francisco, but less strongly, and do not drop in San Mateo County.

Source: 2007 San Francisco Economic Forecast, Beacon Economics LLC

kwilliamson@examiner.com

Bay Area NewsLocal

Just Posted

Pharmacist Hank Chen is known for providing personalized service at Charlie’s Pharmacy in the Fillmore.<ins> (Kevin N. Hume/The Examiner)</ins>
Left: A Walgreens at 300 Gough St. is among San Francisco stores closing.
Walgreens closures open the door for San Francisco’s neighborhood pharmacies

‘I think you’ll see more independents start to pop up’

San Franciscans are likely to have the opportunity to vote in four different elections in 2022. (Kevin N. Hume/S.F. Examiner)
Electionpalooza: SF school board recall will kick off a flurry of local races

‘It’s going to be a lot of elections and a lot of decisions for voters to make’

Four young politicos were elected to city government on the Peninsula in 2020. From left: Redwood City Councilmember Michael Smith; South San Francisco Councilmember James Coleman; Redwood City Councilmember Lissette Espinoza-Garnica; and East Palo Alto Councilmember Antonio Lopez.<ins> (Examiner illustration/Courtesy photos)</ins>
Progressive politicians rise to power on the Peninsula. Will redistricting reverse the trend?

‘There’s this wave of young people really trying to shake things up’

The Walgreens at 4645 Mission St. in The City is among those slated to close. <ins>(Courtesy photo)</ins>
Walgreens says it’s closing five San Francisco stores due to crime. Where’s the data?

Walgreens should be transparent, enlighten San Francisco leaders about crime’s effect on business

Most Read