The Bay Area’s economy faces a long, slow recovery but things are more stable than they were at this time last year, an economist with the Association of Bay Area Governments said today at a conference for local government, regional agencies and business.
“There’s light at the end of the tunnel but it’s a very long tunnel,” said Paul Fassinger, ABAG’s economist and director of research. He said the area’s economy won’t improve much until 2011.
Speaking at the agency’s annual regional economic outlook conference, Fassinger said incomes are “not expected to grow appreciably” in the Bay Area and that the region’s inflation rate will likely hover at 2.5 percent for the next two years.
He said the only good news is that the worst may be over.
Howard Roth, the chief economist for the California Department of Finance, agreed that the road to local economic health is a long one.
“Recovery will likely be slow as unemployed workers try to find jobs and consumers struggle to get their finances in order.”
Roth said another wave of mortgages that currently have low interest rates will have to reset to higher rates between 2010 and 2012, a factor that could lead to more home foreclosures.
He said the number of unemployed people in California has more than doubled, from 1 million people in the fourth quarter of 2007 to 2.2 million in the third quarter of last year.
Roth noted that California’s 12.4 percent unemployment rate is one of the highest in the country. He said one theory is that states like California that saw their economies grow quickly during the economic bubble wound up falling harder when the economy declined.
ABAG senior regional planner Hing Wong said consumer spending continues to be weak and retail sales are forecast to grow by only 0.4 percent in 2010 and 2.2 percent in 2011.
Wong said the slowdown in the job market and the high level of unemployment, compounded by the state’s budget issues, have eroded consumer confidence.
Wong predicted that there will be a taxable sales increase of only 1 percent in 2010 and 1.9 percent in 2011.
Andrew LePage, an analyst for DataQuick Information Systems, said the Bay Area’s housing market has stabilized, except for high-end homes, which now are seeing their prices fall after initially remaining fairly stable when the economic downturn started.
LePage said the volume of sales of high-end homes has increased because the sellers of such homes are becoming “more realistic” about the lower prices they will have to accept.