Local Economic Report

Fall 2012

2012
SONOMA COUNTY

Fall 2012 Local Economic Report

The Sonoma County Economic Development Board (EDB), in partnership with the Sonoma County Workforce Investment Board (WIB), is pleased to present the Fall 2012 Local Economic Report. Our research partner, Moody’s Analytics, provided the research for this report. Highlights from this Local Economic Report include: ■ The aging populations and increasing access to healthcare in the U.S. and abroad bode well for the burgeoning medical technology industry. Technology as a whole, however, will increasingly feel the headwinds generated by recession in Europe and slowdown in Asia. ■ Winemakers will increasingly contribute to the economy in part because of the largest wine grape harvest in three years. Consumers are also spending more on discretionary goods, and if incomes and confidence strengthen as expected, pricing ought to improve further in 2013. ■ Visitor-dependent industries will thrive due to the strengthening U.S. economy and improving outlook of wine county. Passenger traffic through the first eight months of 2012 increased 3% from a year earlier, and hotel occupancies are at their highest level since 2005. ■ Sonoma County’s recovery will strengthen in 2013, with job growth climbing above the state and national averages in the next year’s second half. Technology and wine will be positive drivers.

Thank you for your interest in the Economic Development Board’s research. For additional information, questions, comments, or suggestions please contact us at (707) 565-7170 or visit www.sonomaedb.org.

Sincerely,

Ben Stone Executive Director

©2012 Sonoma County Economic Development Board. The Economic Development Board (EDB) believes all data contained within this report to be accurate and the most current available, but does not guarantee its accuracy or completeness. Use of data from an outside source does not represent an endorsement of any product or service by the EDB, its members or affiliates. This publication can be made available in alternative formats such as Braille, large print, audiotape, or computer disk. Please direct requests to (707) 565-7170 and allow 72 hours for your request to be processed.

SONOMA COUNTY
EMPLOYMENT GROWTH RANK
2011-2013

RELATIVE EMPLOYMENT PERFORMANCE (1997=100)
125 120 115 110 105 100 95 97 98 99 00 01 02 03 04 05 U.S. 06 07 08 SON 09 10 11 12F 13F 14F 15F 16F

VITALITY
RELATIVE RANK

44 1st quintile
2011-2016

99%
U.S.=100%

168
Best=1 Worst=384

RELATIVE COSTS
LIVING BUSINESS

63 1st quintile
Best=1, Worst=392

121% 93%
U.S.=100%

LIFE CYCLE PHASE

Growth/Mature

2005
19.9 2.4 186.3 0.8 4.4 4.4 465.9 1,598 1,221 622.2 11,874 -2.5 1,997

2006
20.4 2.4 189.0 1.4 4.0 8.2 465.2 1,357 555 621.5 8,991 -2.5 451

2007
20.8 1.8 190.6 0.8 4.3 4.4 467.4 910 521 574.9 6,664 -0.0 837

2008
20.3 -2.3 186.7 -2.1 5.8 0.6 473.1 544 68 407.4 3,562 3.6 1,503

2009
19.0 -6.1 171.6 -8.1 9.6 -7.1 479.5 371 71 348.6 5,605 4.1 2,170

2010
19.8 4.0 168.4 -1.9 10.4 3.8 484.7 287 190 362.1 4,623 3.3 2,490

2011
20.2 1.9 169.5 0.7 9.8 4.1 488.1 449 183 332.5 4,279 1.8 2,296

INDICATORS
Gross metro product (C$B) % change Total employment (000) % change Unemployment rate Personal income growth Population (000) Single-family permits Multifamily permits Existing-home price ($ ths) Mortgage originations ($ mil) Net migration (000) Personal bankruptcies

2012
20.2 0.3 173.4 2.3 8.6 3.8 493.7 388 202 344.2 6,623 3.7 1,971

2013
20.8 2.5 177.2 2.2 8.0 5.2 499.2 694 417 355.4 4,083 3.5 1,969

2014
21.6 4.2 181.8 2.6 7.1 7.4 504.8 1,534 457 397.2 2,649 3.6 2,036

2015
22.5 4.1 187.4 3.1 5.9 7.2 510.4 1,732 404 435.6 2,840 3.5 1,996

2016
23.2 3.1 192.0 2.5 5.4 6.0 516.1 1,558 369 467.8 3,192 3.5 2,083

STRENGTHS & WEAKNESSES
● Emerging technologies add to existing medical devices and computer equipment clusters. ● Highly educated workforce relative to California and the U.S. helps to attract and maintain investments. ● High office vacancies hinder new construction. ● High costs deter businesses and high-skilled workers.

ANALYSIS
Recent Performance. Sonoma County’s recovery has found new positive momentum since the beginning of the year thanks to stronger gains in technology, business services, healthcare and visitordependent industries. Broad-based payroll gains in the metro area’s core industries have helped lower the unemployment rate to near 7.6%, below the state average, even as the labor force resumes growth. Improvements in the real estate market are less clear-cut. While a reduction in the number of unsold existing homes is lifting house prices, permits for new residential construction have yet to increase. Technology. High technology will increasingly feel the headwinds generated by recession in Europe and a slowdown in Asia. Sales for Agilent Technologies’ SON-based electronic measurement division fell 1% in the quarter ending in in Asia and Europe outweighed a pickup in orders from the Americas. In contrast, aging populations and increasing access to healthcare in the U.S. and abroad bode well for the burgeoning medical technology industry. Sales at Medtronic’s SON-based vascular unit rose crease thanks to the lack of severe weather during that wineries pay for wine grapes needed to produce this year’s vintage wines. Further helping to improve the outlook for SON Market share and sales for wines priced above $10 a bottle, Sonoma County’s specialty, are increasing as consumers begin to spend more on discretionstrengthen as expected, pricing ought to improve further in 2013. Tourism. A strengthening U.S. recovery after outlook for the wine country bode well for SON’s visitor-dependent industries. Greater interest in the county’s destinations is evident in increasing pas-

STRENGTHS

WEAKNESSES

CURRENT EMPLOYMENT TRENDS
% CHANGE YR AGO, 3-MO MA Nov 11 Mar 12 Total -0.4 -0.6 Construction -8.5 0.2 Manufacturing 2.1 1.8 Trade -1.3 -1.3 Trans/Utilities -0.4 1.1 Information 0.4 -0.7 Financial Activities -4.3 -5.0 Prof & Business Svcs. 1.1 3.5 Edu & Health Svcs. -0.8 -1.2 Leisure & Hospitality -0.7 0.3 Other Services -1.8 -2.5 Government 1.8 -4.1 Jul 12 2.9 7.4 6.2 1.6 1.7 0.1 -1.8 6.6 2.7 2.4 -1.0 1.0

FORECAST RISKS

X

● Developing Asian economies provide expanding markets for SAA’s medical device makers. ● Stronger income and job growth in 2013 strengthens pricing power for wineries. ● Descent of foreclosures stalls, extending price declines further than forecast. ● European recession partially weighs on county wine exports and demand for tourism services.

X

SHORT TERM

LONG TERM

RISK-ADJUSTED RETURN, ’11-16

0.38%

UPSIDE

DOWNSIDE

months of 2012 increased 3% from a year earlier and was close to matching the airport’s peak for the same time period reached in 2008. Hotel occupancies in SON have also increased this year and are now at their highest level since 2005, according to Smith Travel Research. Amid this strengthening outlook, a luxury 59-room hotel is being proposed in the historic Sonoma Plaza area. Care Act ensures that the number of U.S. residents Sonoma County’s recovery will strengthen in with healthcare insurance will rise over the next few 2013, with job growth climbing above the state years, increasing the pool of potential customers and national averages in next year’s second half. for medical devices. However, it is unclear whether - unemployment rate will fall below 8% by the vices beginning in January by moving some of their production to cheaper overseas locations. county will maintain its high quality of life and Wine. Winemakers face an improving environ- attractiveness for high-skilled workers. However, ment and will contribute more to growth in the high housing costs will keep it a below-average coming year. After two consecutive years of smaller performer over the extended forecast. than average wine grape harvests, Sonoma County’s Eduardo J. Martinez 2012 wine grape harvest yield is expected to inFall 2012 www.sonomaedb.org 2

EMPLOYMENT & INDUSTRY
TOP EMPLOYERS
Kaiser Permanente St. Joseph Health System Sutter Medical Center of Santa Rosa Safeway Inc. Agilent Technologies Amy’s Kitchen Medtronic CardioVascular Wal-Mart Stores Inc. Kendall-Jackson Wine Estates AT&T Lucky River Rock Casino Hansel Auto Group Petaluma Acquisitions Exchange Bank The Home Depot U.S.A. Inc. Korbel G&G Supermarket Mary’s Pizza Shack
Source: North Bay Business Journal: Book of Lists, January 2012

MIGRATION FLOWS
INTO SONOMA COUNTY
San Francisco, CA Oakland, CA Sacramento, CA Los Angeles, CA Napa, CA San Jose, CA Vallejo, CA San Diego, CA Santa Ana, CA Riverside, CA Total In-migration

INDUSTRIAL DIVERSITY
2,812 2,489 1,497 1,200 1,150 900 840 650 640 600 550 539 500 460 425 419 390 376 325 300 Most Diverse (U.S.)
1.00 0.80 0.60

NUMBER OF MIGRANTS
2,717 1,041 704 470 469 411 404 332 199 193 12,910 1,767 882 748 501 421 397 369 353 193 170 12,293 617

0.44
0.40 0.20 0.00

Least Diverse

EMPLOYMENT VOLATILITY
Due to U.S. fluctuations
100% 80% 60%

FROM SONOMA COUNTY
San Francisco, CA Oakland, CA Sacramento, CA Vallejo, CA Napa, CA Los Angeles, CA San Jose, CA San Diego, CA Riverside, CA Seattle, WA Total Out-migration Net Migration

Relative to U.S.

94%

160 100

PUBLIC
Federal State Local 2011 1,545 4,733 21,032

40% 20% 0%

Not due to U.S.

Due to U.S.

SON

U.S.

COMPARATIVE EMPLOYMENT AND INCOME
Sector
Mining Construction Manufacturing Durable Nondurable Transportation/Utilities Wholesale Trade Retail Trade Information Financial Activities Prof. and Bus. Services Educ. and Health Services Leisure and Hosp. Services Other Services Government

% of Total Employment
SON 0.1% 4.9% 12.1% 46.6% 53.4% 2.3% 3.9% 12.7% 1.4% 4.5% 12.4% 14.3% 11.8% 3.5% 16.1% CA 0.2% 3.9% 8.9% 62.3% 37.7% 3.4% 4.7% 10.9% 3.1% 5.4% 15.1% 13.0% 10.9% 3.5% 17.1% U.S. 0.6% 4.2% 8.9% 62.0% 38.0% 3.7% 4.2% 11.1% 2.0% 5.8% 13.2% 15.1% 10.1% 4.1% 16.8%

Average Annual Earnings
SON $14,004 $62,987 $71,683 nd nd $62,749 $67,015 $33,929 $64,343 $27,140 $46,775 $55,570 $21,780 $37,542 $65,195 CA $74,539 $64,358 $88,803 $99,683 $71,414 $64,552 $75,403 $36,718 $122,761 $44,494 $66,127 $55,971 $28,804 $36,047 $76,497 U.S. $70,081 $53,795 $73,041 $75,070 $69,828 $60,610 $75,460 $31,162 $91,647 $46,508 $60,384 $49,569 $24,000 $33,510 $66,559

NET MIGRATION, SON Net Migration, SAA
5,000 4,000 3,000 2,000 1,000 0 08
2008
Domestic Foreign Total 1,913 1,696 3,609

09
2009
2,412 1,642 4,053

10

11
2010
1,806 1,515 3,321

2011
789 967 1,756

Sources: Percent of total employment — Moody’s Analytics & BLS, 2011; Average annual earnings — BEA, 2011

Sources: IRS (top), 2010; Census Bureau, 2011

HOUSE PRICES
350 300 250 200 150 100 50 97 00
SON
Source: FHFA, 1996Q1=100, NSA
GVSL 7225 3121 FR 4451 5412 6221 7211 PH 6214 5617 6211 5613 6241 7139

LEADING INDUSTRIES
NAICS INDUSTRY EMPLOYEES (000)
State & Local Government 25.8 Restaurants and other eating places 12.5 Beverage manufacturing 6.2 Farms 6.1 Grocery stores 5.7 Accounting; tax prep.; bookkeeping; payroll services 4.4 General medical and surgical hospitals 3.9 Traveler accommodation 3.5 Private Household Workers 3.2 Outpatient care centers 3.1 Services to buildings and dwellings 2.9 2.9 Employment services 2.9 Individual and family services 2.1 Other amusement and recreation industries 2.0 High-tech employment As % of total employment 8.9 4.9

PER CAPITA INCOME

44,186

42,514

39,937

03

06
U.S.

09

12

SON

CA

U.S.

MOODY’S RATING

Aa1

COUNTY AS OF APR 16, 2010

Sources: BLS, Moody’s Analytics, 2011

Source: Bureau of Economic Analysis, 2011

www.sonomaedb.org 3

Graphical Analysis
Recovery Regains Momentum Tech Growth Slows Briefly

Sources: BLS, Moody’s Analytics

Sources: BEA, BLS, Moody’s Analytics

Wine Discounting Days Nearing End

Visitor-Dependent Industries Get a Lift

-

Sources: BEA, BLS Moody’s Analytics

Sources: BEA, BLS, Moody’s Analytics

Income Edge Wanes Slightly

Foreclosure Threat Diminishes

Sources: BEA, Moody’s Analytics

Sources: RealtyTrac, Moody’s Analytics

www.sonomaedb.org 4

5-Year Forecasts for Sonoma County
Gross Metro Product, Percent Growth
5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% -7% -8% '05 '06 '07 '08 '09 '10 '11 '12 '13F '14F '15F '16F 2% 0% -2% -4% -6% -8% '05 '06 '07 '08 '09 '10 '11 '12 '13F '14F '15F '16F 10% 8% 6% 4%

Personal Income, Percent Growth

Total Employment, Percent Growth
4% $12000 2% $10000 0% $8000 -2% $6000 -4% -6% -8% -10% $4000

Mortgage Originations ($ Millions)

$2000

'05

'06

'07

'08

'09

'10

'11

'12 '13F '14F '15F '16F

$0

'05 '06 '07 '08 '09 '10 '11 '12 '13F '14F '15F '16F

Net Migration (Thousands)
4 2500 3 2 1 1500 0 -1 -2 500 -3 -4 0 1000 2000

Personal Bankruptcies

'05

'06

'07

'08

'09

'10

'11

'12 '13F '14F '15F '16F

'05 '06 '07 '08 '09 '10 '11 '12 '13F '14F '15F '16F

Source All: Moody’s Analytics

www.sonomaedb.org 5

With acknowledgement and appreciation to local key businesses supporting Sonoma County Economic Development: Director

Executive

Sponsors

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C A L IF O R N IA

RE PU B L IC

Economic Development Board 401 College Avenue, Suite D Santa Rosa, CA 95401 (707) 565-7170 www.sonomaedb.org

A G R I C U LT U R E INDUSTRY R E C R E AT I O N

Sonoma County Health Services ■ County of Sonoma Board of Supervisors