Ray Major, Chief Economist for the San Diego Association of Governments, makes some interesting predictions for our local economy for this year. We are poised for continued prosperity, but there are nuances. Innovation, tourism and the military – the key sectors that drive our economy and make up 27% of it—will grow substantially.
Military employment has grown 15% since 2011; employment in innovation is up 14% in that time span; and tourism jobs have increased by 12% in 6 years. A key “supporting” sector such as healthcare has grown 34% in the same time frame and will continue to grow, though much will depend on what happens with Obamacare and what replaces it. Brick-and-mortar sales are actually weaker than they have been in a long time, and part of the reason is that real wage growth for the lowest 25% has been 0% in 10 years and for median earners it’s only been 1.3%. Bottom line, we are not richer.
However, the Chief Economist sees a growth in real wages in the 2% range based in part on the possibility of fewer skilled workers on the scene as well as non-skilled workers being deported. In his mind, housing is the most significant issue. Interest rate hikes will move mortgages into the 5% level, dampening prices, impacting affordability to levels under 20%, thus softening the market.
*Taken from “San Diego Economic Outlook: “It’s not 2016 anymore…” The San Diego Union-Tribune, February 19, 2017.