Written by Matthew Fienup and Dan Hamilton
The Bureau of Economic Analysis just released its Ventura County GDP data for 2016. Accompanying the 2016 number are revisions to GDP estimates for 2015 and 2014.
The data on Ventura County economic activity was a punch to the gut for the entire CERF team.
Ventura County’s economy is estimated to have contracted by almost three percent last year, led by a loss of more than 1 billion dollars of output in non-durable manufacturing. While the National Bureau of Economic Research is responsible for determining official recession dates, there is a simple rule of thumb that many economists use for identifying a recession: two consecutive quarters of economic contraction. Clearly, an entire year of economic decline qualifies.
By this standard, Ventura County suffered a significant recession in 2016. Revised estimates for the two previous years indicate that the Ventura County economy also saw nearly zero growth in both 2014 and 2015. Together, 2014-2016 represents the slowest period of economic growth of any three consecutive years since the turn of the millennium. The past three years are even worse than the period that includes the Financial Crisis and the Great Recession.
Admittedly, CERF has a bit of a reputation for being pessimistic in our forecasting of regional economic activity—some have even used words like “dark” and “foreboding.” Yet we truly did not see this one coming. One year ago, we published a forecast for 2016 Ventura County economic growth of 1.8 percent. That forecast, as well as CERF’s other forecasts, have generally called for slower economic growth than the forecasts of other economists. Unfortunately, we turned out to be too optimistic.
We may have been too optimistic, but we are not without an explanation.
Policy matters. CERF has been saying this for a long time. The decline in Ventura County’s economic performance is not an accident. It is not the predictable result of a financial crisis, and it can’t be simply explained by demographic changes that are beyond our control. Ventura County’s performance is the result of policies which constrain economic activity and make it exceedingly difficult to start and grow new economic ventures.
We trust large incumbent employers when they communicate what is at issue. Amgen recently announced plans to pare its Ventura County based workforce by nearly 10 percent, at the same time that it is building a new, 136,000 square foot facility in Tampa, Florida. The reason Amgen cited for moving their workforce to Tampa: “affordable cost of living and the potential for growth.” Make no mistake, Ventura County’s housing affordability crisis is the direct result of policy. It is no coincidence that the County which is home to the most stringent urban growth controls in the Nation is experiencing economic decline while its neighbors are growing—Los Angeles and Orange Counties grew more than 2 percent in 2016.
All of this weighs heavily on the CERF team as we prepare our new forecast in anticipation of CERF’s 2017 Ventura County Economic Forecast event in Camarillo, on October 26th. It is too early to say what our economic forecast is for the remainder of this year and the next, as we are still undergoing a comprehensive evaluation of many regional indicators, including general economic, real estate, and financial indicators. What we can say is that the most recent data release will have a significant impact on our forecast, and the impact will be negative.
We fear that folks may soon pine for the good-old days of sunny optimism that has proven to be a characteristic of CERF forecasts.