Welcome to the Regional Outook San Diego, Beacon Economics' quarterly forecast for the San Diego Metropolitan Statistical Area.  This report delivers a clear snapshot of the current state and future outlook of employment, home prices, consumer spending, personal income, and othe leading indicators in this key region of California.

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San Diego Labor Market On Path Of Solid Growth

The employment picture in San Diego continues to improve, with strong job growth and a falling unemployment rate. Since the beginning of 2011, total nonfarm payrolls in the region have increased by 22,300 jobs, for a growth rate of 2.2%. This compares favorably to the state overall, which has seen growth of just 1.7%. The unemployment rate, furthermore, continues to fall, and has been under 10% for two consecutive months – the first time this has happened since 2009. And although the current level of 9.7% is frustratingly high, it is considerably lower than in the state overall (11.7% in October).

Job gains in San Diego have been spread across a broad array of industries, and improvement in the unemployment rate has occurred despite strong growth in the size of the labor force. Combined, these trends show a region that is solidly on a path to recovery. And even though this recovery has been slow, Beacon Economics expects that it will continue into the foreseeable future. Total employment should grow strongly, reaching annual growth rates of 3% in the latter years of the forecast period. Furthermore, by mid 2014, there will be more jobs in the region than there were before the recession. The unemployment rate should continue to fall, dipping into the 6% range in 2014, and into the 5% range by 2016. In sum, the San Diego region will continue its strong labor market showing, with a recovery that soundly outpaces the state as a whole.

 

Housing Market Turn Around?

Promising trends are also developing in San Diego’s housing market. Single-family permits, unlike the rest of the state, have actually been increasing for more than two years. Builders in the region pulled back well before the rest of the state, with permits beginning to fall in late 2003. This helped prevent some of the over-building that occurred in other locations, and ultimately helped the market turn around sooner. And home prices, now at roughly 7 times per capita income, are more affordable than at almost any time during the last decade. This should help to foster healthy growth in housing activity over the forecast period. And although single-family permits will surpass 1,500 per quarter by 2015, they not reach their previous peak of 2,400 during the life of Beacon Economics’ forecast.

Multifamily permits are also on the rise, driven in large part by a strengthening labor market and continued population growth. As of the third quarter of 2011, multifamily permits were more than double their recession-era low. And given that the apartment vacancy rate in San Diego is 4%, demand for more units can be expected over the coming years. Permit activity is expected to surpass 1,000 per quarter in 2013, and 2,000 per quarter in 2016.