Central Coast Economic Forecast 2023

Blog November 15, 2023 by American Riviera Bank

The 2023 Central Coast Economic Forecast event in San Luis Obispo, CA, was a resounding success, drawing in more than 500 community leaders eager to gain valuable insights and projections from industry experts.

The event, hosted at the Madonna Expo, featured an impressive lineup of speakers, including Dr. Chris Thornberg from Beacon Economics, Melissa James, the President and CEO of REACH, and Jocelyn Brennan Roslyn, the President and CEO at HRM Corp.

At the event, attendees listened to a comprehensive state and national economic forecast, San Luis Obispo County forecast, and critical industry updates in ag tech, clean energy, space, housing, and more. Additionally, the event offered networking opportunities, a 3Minutes2WinIt pitch contest showcasing local start-ups, and a moderated dialogue/Q&A session, making it a must-attend gathering for anyone invested in the region's economic outlook.

Dr. Chris Thornberg, National Forecast Presenter¶

Dr. Chris Thornberg, the Director of the UC Riverside School of Business Center for Economic Forecasting and Development and founder of Beacon Economics LLC, is a renowned economist with expertise in economic and revenue forecasting, regional economics, economic policy, and labor and real estate markets. He accurately predicted the subprime mortgage market crash in 2007 and the global economic recession that followed and recently forecasted a V-shaped recovery post-COVID and rising US interest rates.

Dr. Thornberg emphasized that economic forecasters consistently underestimate the reality of the economy and stressed the need to consider both data and narratives in forecasting to avoid making incorrect predictions. Additionally, he noted that the US economy is accelerating, driven by increasing consumer spending despite inflation and declining disposable income. 

Please see our takeaways below:

• Statewide, California has seen a 3.8% job growth since pre-pandemic times, outperforming 33 other states in the US.
• California has a labor force issue due to insufficient housing supply, which leads to high-income people moving in and driving out lower-income folks.
• The pandemic has contributed to an increased average weekly earnings of $1,000 and a median household income higher than the national median.
• Within the Central Coast, leisure and hospitality are the most prominent sectors regarding job share, followed by government and construction.
• Santa Barbara and San Luis Obispo counties have seen increases in hotel revenues by 25%.
• Early indications point towards a tight labor market due to a consistent lack of labor force expansion over the past decade.
• Wineries have almost doubled since 2012, and hotel revenues are 25% higher than pre-pandemic levels.
• Local entrepreneurs have often moved their operations elsewhere due to a need for more available workers in San Luis Obispo County over the past ten years.

Melissa James, President and CEO of REACH¶

Melissa James, President and CEO of REACH, is a distinguished individual with remarkable achievements, including Top 20 Under 40 (SLO Tribune) and Most Influential People in the Region (Pacific Coast Business Times). In her presentation, she described how San Luis Obispo County is undergoing a transformative period driven by a convergence of energy, space, and innovation opportunities, drawing global attention. She also emphasized how clean tech is a robust sector with substantial investment in wind projects.

Please see our takeaways from Melissa's presentation:

• Clean tech is a robust sector with an investment of $425 million for three wind projects off the Central Coast.
• Space industry activity is proliferating, with Vandenberg Air Force Base with Space Force and SpaceX looking to add 500-800 jobs soon.
• The technology sector growth has exceeded state and national averages since 2012 with a 24% job increase, 52% wage increase, and a 36% value add increase.
• AG tech has also seen sustained growth over the last 20 years with the promise of new technology incubation.
• Precision Manufacturing is becoming a strong suit for the region, generating 10,000 jobs at an impact of $2.5 billion, representing 15% job growth in SLO County alone.

Jocelyn Brennan, President and CEO of HRN Corp¶

Jocelyn Brennan, the President and CEO of HRN Corp, specializes in entitlement consulting, stakeholder engagement, and government relations. She has worked in the community on policy, development, and strategic initiatives at the state, county, and city levels. Her presentation focused on how and why San Luis Obispo County ranks as the third least affordable county in California and potential solutions to address the current problem.

Brennan highlighted the impact of interest rates, noting that with a 7.5% interest rate, monthly payments on a 30-year loan would further increase, noting fewer than 10% of families can afford a median-priced home in San Luis Obispo.

Please see our takeaways from Melissa's presentation:

• First-time homebuyers would need an annual income of $143,000 (with a 6.5% interest rate and 20% down payment), while non-first-time homebuyers would require $220,400 a year to afford a median-priced home.
• Renting costs are on average $2,500/month for one-bedroom apartments at an income of $3,400/month, leaving local renters living paycheck to paycheck.
• The housing supply in the county needs to catch up with population growth. The population has increased by 12 million, while housing permits have decreased by 52,000 from 1986 to 2022, which indicates a pressing housing shortage.
• Her solution to this housing shortage is that SLO County needs to facilitate the construction of 10,810 homes by 2028, as it is currently on track for only 1082 permits in 2022.
• Other solutions include increasing density allowance, streamlining permitting processes, and offering incentives for developers, including affordable units and tiny homes.