East Bay Economic Forecast Projects Continued Growth
At the East Bay Economic Development Alliance’s spring membership meeting last week, Dr. Christopher Thornberg of Beacon Economics presented his annual economic outlook for the East Bay. In general, the report was extremely positive, suggesting that the ongoing economic growth pattern should continue for a last a couple more years, if not longer.
Positive signals include a continued trend of employment growth and declining unemployment and underemployment. Wages have failed to keep up in recent years, but Dr. Thornberg suggested that the reduced supply of available workers will soon start to push wages upward. He also predicted that gas prices will remain relatively low in the near future, meaning that consumers will have more disposable income available to pump into other segments of the economy such as retail sales.
Housing costs will also continue to rise. Unlike the housing bubble that led to the great recession, the underlying fundamentals of the housing market are currently strong. Lending practices are sound (though perhaps too restrictive) and demand in the Bay Area continues to far exceed the available supply.
The report did include a few warnings that could have negative impacts down the road. These include uncertainty in Asian markets (particularly China) and an ongoing failure in the US to invest in and maintain our infrastructure.
As far as policy prescriptions, Dr. Thornberg suggested the following:
- Build more housing…lots of it: Population growth is assured and a failure to provide smartly design and located housing will hamper economic growth and create an ongoing affordability crisis.
- Support innovation by ensuring that the underlying conditions are in place to support it: Government can support innovators by ensuring that growing companies have the infrastructure, housing, and real estate they need. In terms of commercial space, more Flex/R&D space is needed in the East Bay.
- Reform regulations that limit growth: Specifically, Dr. Thornberg called out CEQA and a tax system to exacerbates a growing income inequality as policies in need of reform.