By Reggie Ellis @Reggie_SGN
TULARE COUNTY – Build it and they will come, the “it” being more housing and the “them” being mobile mid-level managers and young professionals looking for housing, any housing.
In his annual Economic Forecast to the Tulare County Economic Development Corporation on April 5, Christopher Thornburg, founding partner of Beacon Economics, said the biggest issue facing the Tulare County economy is a labor shortage. Unemployment is at just 4% statewide and at a 10-year low in Tulare County and near a historic low. Employment has been on the rise since 2010 and last year Tulare County gained 1,000 new jobs in government, 600 in education and health care, 300 in wholesale trade, and 100 new jobs in both manufacturing and construction.
“People should be moving here,” Thornburg said. “We have more jobs than people.”
People aren’t moving into California or Tulare County because there isn’t a place for them to live. Low levels of single-family home permits are helping existing homes in Tulare County appreciate at a steady pace and low mortgage rates are helping to keep homes among the most affordable in the state. Single-family homes still make up the majority of permits issued in the county, but multifamily homes are growing at a faster rate. From 2017 to 2018, single family home permits increased by less than 1% but multifamily home permits doubled.
“We don’t have an affordable housing crisis,” Thornburg said, “we have a housing supply crisis. There are no empty homes. This is sheer lack of supply.”
New homes were outpaced by growth. Tulare County’s population grew by 1% last year, better than the state average, with nearly all of that coming from within the county. But if Tulare County can’t keep pace with its natural growth, how can it hope to capitalize on the need for homes statewide? Homeownership rates in Tulare County (54.9%) are higher than the state while vacancy rates are almost as low. Apartment vacancy rates continue to decline despite more permits being issued each year, further evidence of a housing shortage.
“It’s a great time to be a Californian, except that we don’t want you,” Thornburg quipped.
If Tulare County can find the investment to build more single family housing, Thornburg said the next wave of growth may happen in the Central Valley, especially Tulare County which leads the state in housing affordability when comparing home prices to income.
Workers are making more money in Tulare County than surrounding counties. In 2017, per capita personal income in Tulare County ($39,756) surpassed Kern County ($38,560) and Kings County ($35,326). That was a 4.2% increase, which outpaced Fresno (3.1%), Kern (1.9%) and the state as a whole (3.8%). Between 2012 and 2017, median income growth was led by Farmersville (13.1%), Exeter (12.7%), Tulare (7.8%), Dinuba (2.8%), and Visalia (2.3%). Median income did fall in Woodlake (-7.6%), Porterville (-6.4%), and Lindsay (-6.4%). When cost of living is factored, skilled workers in Tulare County are earning the same wage as their counterparts in the rest of the state. There’s also good news for educated workers. The unemployment for workers with a bachelor’s degree or higher was just 1.1% locally, well below the statewide rate of 3.5%.
“The American household is as wealthy as it has been in the last 20 years,” he said.
Tulare County is already benefitting from employment gains and wage increases. Taxable sales in Tulare County grew 4.8% in 2018, higher than surrounding Kings and Fresno Counties, mostly due to business and developer spending. The City of Visalia, which boasts the largest tax base in the county, saw an increase of 4.4%. The fastest growing tax bases were Woodlake (50.9%), Lindsay (22.2%), Exeter (14.9%) and Farmersville (13.2%). That means there is a lot of potential for Exeter, the only one of those cities which has not passed a sales tax measure in the last two years. Woodlake was bolstered by having the only recreational marijuana dispensary in the county. Consumer spending in Tulare County was fueled by gas stations which increased 8.2% last year thanks to increase in fuel prices. Thornburg forecasts taxable sales will increase by 5% over the next two years.
Commercial real estate and employment were hit hardest in the realm of professional and business services. Permits for office space declined $4 million and the sector cut more than 700 positions, the highest in the county. The lone bright spot for commercial real estate was retail, where permit values increased by 11.3%. Office vacancy rates fell to 11.3% and asking rents are only up slightly. Office space in Tulare County averaged $15.33 per square foot, $4 lower than Kern County and nearly $5 lower than Fresno County.
“Expansions die of excess,” said Thornburg, “not from healthy, steady growth.”
Most of the nation’s economic issues are political and not fiscal. Political dysfunction is growing as more left leaning politicians have been elected to Congress to join the extreme right members who were already there creating a disconnect between economic realities and political discourse.
“There are fewer centrists in Congress today than a year ago,” Thornburg said.
Imbalances in the system and the growing national debt is primarily due to the federal government’s inability to balance its budget. “We are spending as if there is no debt,” Thornburg said.
Reports of an economic slow down are accurate Thornburg said, but only because the federal government provided the economy with an artificial boost. He said the Tax Reform Act that went into affect on Jan. 1, 2018 was not tax reform but instead a tax cut. Thornburg said this helped maintain high growth in the economy because people had more money in their pockets, a tactic the government normally employs in a recession to help the pain of workers losing income and jobs.
“You don’t do tax cuts in a good economy,” Thornburg said. “I don’t know why you would do that.”
Thornburg said there are no signs of a global economic recession. The Trump Administration’s trade wars with most of the world are beginning to calm down and were never as serious as his Tweets would suggest. After implementing retaliatory tariffs, the European Union is now negotiating a new Trans Atlantic Investment Package and the new U.S.-Mexico-Canada Agreement (USMCA) is “about 99.7% the same as NAFTA [North American Free Trade Agreement],” Thornburg said.
Exports are up across the board, with the exception of China. Exports to China only represent 0.75% of gross domestic product but America’s imports from China represent 4% of China’s gross domestic product, meaning China has more to lose in a trade war than America. While industrial production in the U.S. has been ramping up for the last two years it is at a decade low for China.
“I’d like to give the President a giant high five on this,” Thornburg said. “The largest economy in the world will have to start playing fair in the global sandbox.”
China, however, is the biggest challenge to Tulare County’s economy. China directly affects the county’s largest sector, agriculture, and more specifically its third largest crop in citrus. Oranges are Tulare County’s top export accounting for nearly half of outgoing trade. China is the county’s second largest agriculture trade partner and a major importer of county-grown citrus.
While county agriculture saw a significant decline in output, its crops fetched a higher value and it hired more people than non-farm industries. Output was down 11.8% but value was up 10.5%. From February 2018 to February 2019, farm employment expanded by 3,400, an 8.6% increase versus a modest 1.2% increase of about 1,500 jobs in other industries.
“Things are fine and they should stay fine,” Thornburg said.