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High Housing Costs, Scarcity Of Skilled Workers Slow Economic Growth

Health services has become the largest employment sector in California and is projected to add about 40,000 positions over the next 12 months, according to the Center for Business and Policy Research at the University of the Pacific in Stockton.


California's economic growth will continue to expand at a steady rate over the next couple of years. That's according to the latest forecast from economist Jeff Michael who heads the Center for Business and Policy Research at the University of the Pacific. He says a growing scarcity of skilled workers and extreme housing costs will prevent faster economic growth.

"But we don't think it's going to decline much from where it is right now,” says Michael. “And we're projecting job growth to remain at about a two percent rate in the Bay Area and a little bit better than that in Sacramento and the North San Joaquin Valley."

The forecast projects construction activity with continue to grow with about 35,000 new jobs in each of the next three years.

State and local government will be one of the slowest growing sectors in California. Michael is projecting 0.5 percent job growth over the next several years as state and local governments grapple with rising pension costs.

"But having said that,” says Michael, “there's no risk that Sacramento's largest employer...it's not an industry or factory that's going to shut down and move to another location or go out of business due to a new competitor. So it's still a fairly stable, slow growing base that the Sacramento economy has underneath it."

Meanwhile, Michael projects California's unemployment rate will stabilize at around 5 percent, or slightly lower, for the next three years. Growing sectors include professional scientific, technical services and construction.  

Health services is another growing sector. In fact, Michael says the Central Valley's economic outlook has improved a little, partly because efforts to repeal the Affordable Care Act have failed. He says healthcare has become a core industry in the Sacramento region and North San Joaquin Valley.

"Some of that has been fueled by increased levels of health coverage that have been driven by the Affordable Care Act. So if the government were to pull back its support, that would definitely have an economic effect on this region, it would not be positive. But it looks like that's not going to happen now."

Michael says the health services sector is projected to add about 40,000 positions statewide over the next 12 months.

Here’s the forecast for the Sacramento region:

Total nonfarm employment is expected to increase 1.8 percent in 2017 and 2.4 percent in 2018. The leading sectors for employment growth in 2017 include education and health services (4.1%); leisure and hospitality (3.9%); and professional and business services (1.8%). Declines are predicted for the information (-3.5%) and manufacturing (-2.5%) sectors.

The Sacramento region’s average annual wage for 2017 is predicted to be $62,447, an increase of 0.6 percent from the previous year. By 2021, the average annual wage is forecasted to be $72,481.

The population of the Sacramento area is expected to be 2,330,359 in 2017, an increase of 1.3 percent from 2016.

About 8,912 housing starts are expected in 2017, growing to 14,370 in 2021; most of which are single family starts.

Steve Milne

Morning Edition Anchor & Reporter

Steve is the Morning Edition anchor for Capital Public Radio. He covers stories on a wide range of topics including: business, education, real estate, agriculture and music.  Read Full Bio 

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