On June 10th, during a luncheon sponsored by Comerica Bank, the Farm Bureau, the Santa Cruz County Business Council and the Santa Cruz Area Chamber of Commerce, PhD Economist Robert Dye offered some uplifting news about the economic outlook for the future. Some 5 years after experiencing the worst economic downturn since the Great Depression our economy is beginning to show signs of returning to normalcy. According to the indicators used by Dr. Dye, job growth has has steadied, with roughly 200,000 new jobs being created every month, home and automobile sales are up, and new construction is picking up asa result, with more projected growth coming. Consumer confidence has returned, as home equity increases and people begin to spend more money, and the federal reserve is likely to reverse it’s trend toward quantitative easing (the reduction of interest rates to increase lending).
However, as Dr. Dye was quick to point out, we are no longer in a recovering economy, but instead, find ourselves in a “mid-cycle” economy, meaning that things have largely evened out and that future growth is expected to be moderate. External uncertainties aside, such as the crisis in the Ukraine and any future fiscal fallouts instigated by Congress (think a credit downgrade), we can reasonably expect GDP growth to remain at close to +/-3% for the next few years. Post 2014, the Fed is likely to begin increasing interest rates again, which will moderately impact access to capital, for the sake of greater aggregate stability.
On a regional level, as goes the larger Bay Area, so goes Santa Cruz. As the housing market continues to expand in San Francisco and other areas of the Valley, expect the the same in Santa Cruz, but with a slight delay. While this does mean that the cost of living is likely to increase, it also means that we can expect higher consumer spending, and a greater influx of tourism (our hotel occupancy rate has already risen substantially). However, these trends are expected to be gradual, with the risk of sudden uncertainty minimal.