Recent Quotes from
Bill Watkins, Ph.D., Executive Director,
UC Santa Barbara Economic Forecast Project

• February 2008
  Ventura County Economic Outlook,

  "...net of the impact of Amgen and Countrywide Financial, Ventura County's economy is growing faster than the 1.6 percent aggregate. The reason Ventura County businesses are reporting as positively as they are, is that, (excluding real estate, retail, and construction) they are enjoying their typical economic activity."

• January 23, 2008
  California Economic Outlook

  "California's economy tends to be more volatile than that of the United States. The State does better than the rest of the country in the good times, and it does worse in the bad times. Consequently, as the United States economic growth slows, California's is likely to slow even more. So far at least, California's economy has been remarkably resilient, even as it has born a very disproportionate share of the United States housing crises. Indeed, only two California economic sectors, Construction and Non-Durable Manufacturing, have shown significant weakness."

• November 2007
  San Luis Obispo County Economic Outlook

  "We at the UC Santa Barbara Economic Forecast Project have pointed out before that quality of life, as it is discussed today, is a luxury good. That is, people don't so much care about air quality until more immediate needs are met, needs like food, shelter, and work. "

• October 3, 2007
  California Economic Outlook

  "Once again California is at the leading edge of economic uncertainty. The State accounts for 40 percent of the United States decline in home sales. California also is the home to the nation's largest home lender. We do not believe, however, that the State's real estate turbulence will lead to a recession."

• April 19, 2007
  2007 Santa Barbara County Economic Outlook, CD edition page 24

  "After several years of above-trend growth, the United States economic growth rate slowed in the second half of 2006. Current data are decidedly mixed. However, the most recent data, particularly jobs data, have been strong…The 'worry of the day' is sub-prime loans. In general, we believe the concern about foreclosures is over-hyped. We do have concerns about the reactions of lenders and regulators."

• November 17, 2006
  2007 San Luis Obispo County Economic Outlook, CD edition page 13

  "Another interesting demographic trend, the age of its citizens, is having an effect on San Luis Obispo County. The population is getting older, a lot older. Part of this reflects the national trend, a result of the Baby Boomer generation. But San Luis Obispo County is getting older faster than is the United States. This is a result of migration patterns.
  
  Primarily, older couples and individuals are the demographic groups migrating to San Luis Obispo County. Younger families are primarily the ones migrating out of the County. The result is a decline in the average household size. With a declining household size, it is possible to see an increase in housing units and a decrease in population. However, low or negative population growth is usually associated with little or no new housing construction.
  
  Demographic trends have economic and non-economic impacts. An aging and slowly growing or shrinking population clearly suggests falling school enrollments. This leads to school closings, a traumatic experience for most communities. The composition of businesses also will change. We have previously documented the continuing out-migration of tradable-goods producers. The retail and service sectors catering to children will shrink. The retail and service sectors catering to the over-50 population will grow, however.
  
  Finally I note, again, the community's most significant challenge will be providing acceptable living conditions for lower- and middle-wage workers. The community depends on these people. Increasingly, these workers are crowding several families into units designed for far fewer people. Ultimately, this density will have economic and non-economic consequences. These consequences will include at least some declining neighborhoods, increased crime, changing socio-economic conditions of students, and increased demand for government services."

• November 17, 2006
  2007 San Luis Obispo County Economic Outlook, CD edition page 26

  "The County felt some pain earlier this decade, when the government sector cut back in response to falling tax receipts at the State level. California's reliance on a steeply-progressive personal income tax suggests continued volatility in the State's funding source. The way local governments in California are financed assures that they will share the pain when the State loses revenues. Since the Government sector accounts for over 20 percent of San Luis Obispo County jobs, the County's economy will experience volatility induced by this sector."

• November 17, 2006
  2007 San Luis Obispo County Economic Outlook, CD edition page 26

  "In general, tradable-goods producers are migrating out of San Luis Obispo County, regardless of whether they are service or product producers. An economy consisting of non-tradable service producers is limited in growth potential. Its growth is a function of population growth, the growth in average wealth of the population, and the change in the average relative proportion of services consumed by the population. If the population is stagnant, the only possible sources of service-sector growth are an increase in services spending as a proportion of total spending or an increase in wealth."

• April 27, 2006
  2006 Santa Barbara County Economic Outlook, CD edition page 26

  "…we at the UCSB Economic Forecast Project have been a bit puzzled over the popular perception that the economy is doing poorly. … the perception is primarily due to uncertainty…For a relatively short time after World War II, American workers were very secure in their careers. They were insulated from competition, and technological threats were minimal. Many people could look forward to entire careers with one employer. Today, international competition and changing technology make that an impossible dream. Indeed, over the past decade, many jobs have materialized and then faded away in short order."

• April 27, 2006
  2006 Santa Barbara County Economic Outlook, CD edition page 149

  "Throughout history and around the world, most communities and peoples have embraced growth. In part, this was for self defense. Larger communities are safer from attacks by their neighbors. However, even when defense was not an issue, communities wanted to grow. Presumably, this growth was expected to increase the wealth of the existing citizens.
  
  In part, the growth was expected to increase the economic opportunities of the community's existing citizens, thereby increasing their wealth. Economic growth also increased the economic opportunities of incoming migrants, and part of that opportunity would naturally be capitalized in existing home values. The value of the home would increase and drive up the wealth of the homeowner.
  
  Growth can also increase home values by increasing community amenities. Larger communities are more likely to have nice restaurants, cultural activities and centers, shopping opportunities, parks, and the like. These amenities increase the desirability of a community and the price of homes.
  
  New home building is clearly not always detrimental to existing home prices. Here, unbridled growth is likely to be detrimental to existing home prices because Santa Barbara County is abundantly endowed with amenities, and home prices are well beyond being influenced by economic activity. Does that mean that no home building is wealth-maximizing for existing homeowners? Probably not.
  
  In economics, we have a term called "corner solution" that can be applied to home building in Santa Barbara County. A "corner solution" is an all-or-nothing concept-it is an extreme solution to a problem. In this case, the two "corner solutions" would be no building at all or unlimited building, rather than an intermediary solution to the problem (some building). Corner solutions are seldom optimal.
  
  On Santa Barbara County's South Coast, we are already seeing some of the negative results of the corner solution (virtually no home construction). These results were discussed above: crowding, traffic, and crime are increasing. Homeowners must ask if it is possible for these negatives to adversely impact home prices.
  
  Santa Barbara County is at the forefront of a new economic phenomenon. There has never before existed a society where the communications technology, demographics, and wealth combined in such a manner that that society could afford large communities whose citizens did not generate the income and wealth to support their own consumption. Certainly, there have been islands of such communities dedicated to consumption (Cape Cod is an example), but these communities have been small and have derived their economies from nearby major economic centers.
  
  Now, with few exceptions, all of Coastal California is becoming what we can call "consumption communities." Santa Barbara, Monterey, and San Luis Obispo are the leading edge of the trend. Only time will tell if the negatives will eventually impact home prices.

• February 17, 2006
  2006 Ventura County Economic Outlook, CD edition page 12

  "… baby boomers are aging, birth rates are low, and the overall population is aging. That is pretty much the story everywhere in the United States. But these trends are amplified in Ventura County. As a population, we are older and aging faster than the national population. Without immigration, the trend would be even more pronounced.
  
  What does this growing aging population mean? It means that the service sector is the growth sector for the coming decade. Consider the demand for health care alone. We believe that as much as 30 percent of Ventura County's economy could be health-care related in our lifetimes. Demand for all kinds of other services will also increase. This ranges from pet care to lawn maintenance to financial planning.
  
  There will be other impacts. This population will be healthier for its age than any previous generation. It will remain active, and it will possess huge amounts of what we call "human capital." It will be a resource. Effectively using that resource is our challenge."

• February 17, 2006
  2006 Ventura County Economic Outlook, CD edition page 28

  "The growth companies of today are companies like Microsoft, Google, and Yahoo!, companies that did not even exist just a few years ago. The fast-growing companies 30 years from now are probably not in existence yet.
  
  This new environment rewards updated human capital, creativity, and risk taking. Those who do not embrace these traits must feel less secure about the economic environment and the pace of the world."

• February 17, 2006
  2006 Ventura County Economic Outlook, CD edition page 123

  "Our research on Ventura County's agricultural workers provides some sense of the issues these workers face. As many as 57 percent of farm worker households are classified as extremely low-income households. Many of these people are undocumented. Many do not speak English, and surprising numbers are not literate in any language. They also do not have access to health care, adequate housing, and many services most of us take for granted."

• November 18, 2005
  2006 San Luis Obispo County Economic Outlook, CD edition page 13

  "At the same time, the over-50 population will dominate the San Luis Obispo County electorate. These people will demand increased local government services, in part to offset decreases from Federal and State governments. Local elected officials will find it difficult to resist those demands. This will be at a time when it is likely that local governments will have to increase the wages of their employees in order to attract or retain qualified staff. Local governments will probably face continuous budget challenges."

• April 29, 2005
  2005 Santa Barbara County Economic Outlook, CD edition page 138

  "Indeed, Santa Barbara County's South Coast may be experiencing what we call the Traffic Paradox. This is the perverse situation where traffic increases while population and jobs decline.
  
  There are two necessary conditions for the Traffic Paradox to occur: First, home prices must be independent of local economic activity. Second, high home prices must have a negative impact on local economic activity.
  
  What happens is that high house prices increase recruitment time whenever a job turns over, and they drive out tradable goods producers. The result is a decline in jobs. When a job does turn over, the new employee is more likely to be commuting from outside the area.
  
  At the same time, young families driven by the dream of home ownership leave. They are replaced by older wealthier couples or individuals. The community's population and the average number of people in a home both decline."

• April 29, 2005
  2005 Santa Barbara County Economic Outlook, CD edition page 138

  "For the past couple of decades California, at the local level and statewide, has invested very little in infrastructure. Certainly, investment in transportation has lagged demographic and economic changes, in Santa Barbara County and in California.
  
  What is to be done? Investment is called for. The issue will probably require some combination of new light rail, an expanded and regionally coordinated bus system, and additional freeway lanes."