2010: Diversified Ventura Poised For Recovery

Californians are so familiar with headlines peppered with words like "cut," "tighten" and "pink slip" that we hardly blink when there is even more bad news. But the conversation is slowly shifting upward in some regions—even turning a bit rosy. Beacon Economics, in partnership with the UC Santa Barbara Economic Forecast Project, has declared 2010 a recovery year for Ventura County.

Now, it's still too early to uncork the champagne (though that might bolster the economy further, as long as you pay with cash). No one says it's going to be easy or smooth.

Ventura County may be on the upswing now because it was one of the earliest areas to be crunched by the downturn. Things started slowing down in mid-2006, said Brad Kemp, the director of regional research at Beacon Economics. That's 18 months before the "official" national recession kicked in. But the recovery, he said, will require patience.

Presenting the findings of their economic forecast report February 19, Kemp laid out the recent history of the economy in Ventura County. Highlighting the economic diversity—from pharmaceuticals to agriculture, "mom and pop" shops to the Camarillo outlet mall—Kemp said the county has a good, and probable, chance of revival.

In our conversation with Kemp, he had more to say about local industry, immigration, and jobs:

Q: Can you be a little more specific about why Ventura County will recover faster than the rest of the state?
Ventura County went into the downturn very early on and so most of its job losses have really happened already. [The county is] so manufacturing focused, especially on the pharmaceutical side—many pharmaceuticals remained strong and will remain strong, will actually rise again as the base begins to recover. That will directly relate to manufacturing gains and creating production gains for Ventura County.

Now the county overall (if you look at it coming out of this recession, should the dollar remain relatively weak) has very strong industrial, electronic and manufacturing sectors that will bode well. But, it's clinical manufacturing that looks very good in the long term. Given that the baby boom generation, born 1946-1964, are going into the heaviest use of their lives, that is going to create a demand for pharmaceutical goods and that's what Ventura County really specializes in, clinical manufacturing.

Q: Would you say the diversity in industry is what's unique to Ventura County?
It is probably the most unique thing. When we're looking at the tri-county area—Ventura, Santa Barbara and San Luis Obispo—they are kind of all grouped together. Ventura is less dependent on a given industry. San Luis Obispo is 100 percent dependent on tourist dollars. And so the story for that county is very clear—it's tourism.

In Ventura, that's not the case at all; it's not dependent on tourism, it's not dependent on retail, it's not dependent on manufacturing, it's not dependent on professional business services. Ventura is broad in its employment and production base, and therefore, I think, is more balanced and less heavily affected by any one drop-off.

And so that's why it actually took a hit a little bit harder than most too. The county is heavily concentrated in non-durable manufacturing, retail and financial activity—the three sectors most heavily hit, other than construction. That really sucked the life out of Ventura very early on. That's why actually in terms of overall contraction, Ventura was one of the worst in the state.

But remember, when you fall hard, you get room to recover. They still have all of the same basic variables that were in place pre-recession, so the kind of growth they experienced pre-recession, we should expect to see a bit of that again.

Q: How did layoffs at the big pharmaceutical firm Amgen affect Ventura County's economy?
Non-durable manufacturing had been growing right up until the recession (2007), which is converse in most other regions. That's when the Amgen losses became significant and suddenly you started to see that.

Yet, just as we saw the trend of growth pre-recession, there's no reason to believe that growth won't happen again as demand rises and those industries find themselves looking to expand.

Q: How much did Amgen's layoffs affect the housing market when areas like Dos Vientos were built to accommodate Amgen employees?
Sure, it had negative pressure, but, having said that, Ventura County did not see the rises in prices as large as Santa Barbara and San Luis Obispo, and certainly didn't see the fall that San Luis Obispo saw overall. Ventura didn't even see the fall comparative to California. So actually home prices in Ventura County are much better than the many areas within the state. So I don't think housing is the story in Ventura County.

Q: Are workers who lost their construction jobs going to farming?
The converse happened during the rise of the housing market. Suddenly people who traditionally worked in agricultural jobs found themselves with opportunities to work in construction because the number of permits expanded exponentially during the rise of the housing market. The construction industry needed more labor; so where did it come from?

There was not a lot of migration into the area—there was some, but it declined as the housing prices went up. So the labor came from agriculture.

We heard [during the housing boom] from agriculture employers that it was getting difficult to find workers for farms. And so now what's happening is just putting workers back to where they came from.

Q: Are there enough farming jobs to accommodate these workers leaving construction?
Not every job, no, because in many cases the build-up of these markets was unrealistic. So I don't look at 2006 employment levels and think we are going to jump right back to that because that level of growth was unrealistic.

But I do think we can expect the pressure on farmers to get workers will be greatly reduced (due to a larger supply in the work force).

Q: How does immigration affect farming during the recession?
In California agriculture, the immigrant population is a population they draw on. What I would say is many of these people who moved into Ventura County for the construction industry and were working there are going to displace a certain number of those other workers, those people that are willing to take those agricultural jobs, but I don't think it's going to eliminate that inflow of migrant workers.

Q: So you don't think people are going to be leaving the county because there is less work?
Then I would ask you, where are they going to go where there is more work? I think the markets in Mexico are probably tighter than they have been in the past. It's not like everybody has some golden field on the other side of the fence that they are going to run back to. I think everybody realizes that is a pretty broad-spread recession.

Do I think some people will go back? Absolutely. If they can't find work here and they're struggling and the cost of living is relatively high, then yes, I think some will go back.

Q: So, you are basically optimistic about the county?
Ventura is not an agricultural town, it's more of a manufacturing county.

In southern California, we were just so hard hit—especially the Inland Empire (Ground Zero)—completely devastated because of the housing market, housing tracts unpopulated, etc. Those areas are going to take more time to recover.

The good news, all the good things about it, is that affordable dirt is still there. But they're going to have a lot of processing of foreclosures that are going to happen, which are going to be unbelievable.

I said Ventura was hard hit, not as hard hit as the Inland Empire.

Manufacturing is unique to Ventura County. Manufacturing decline refers to employment, not production. Production has been on a growth trend in the county, employment has been declining.

But even though we can say employment has been declining, it hasn't been declining as fast in Ventura County as it has been in Los Angeles and in California and the U.S. overall. As a percentage of total employment within the county, it's remained relatively stable compared to all these other areas where it's been decreasing exponentially. So I would say Ventura is remaining strong in manufacturing both on the employment side and on the production side.

The majority of U.S. job losses in manufacturing is driven by automation. We're putting in machines to do the jobs of people and that displaces the worker. That is why production continues to rise, we are getting more efficient in our manufacturing and that is creating greater output.

The few industries where we are losing jobs to overseas are low-automation manufacturing, such as apparel and furniture. These jobs are going to Southeast Asia or Mexico.

But if you look beyond that to high-tech manufacturing or highly automated manufacturing, that's still in the U.S. Those jobs are not going anywhere.

That means job losses are driven more by technological changes than by an outsource in movement. And that is more important to understand for Ventura County. We are losing manufacturing jobs at a slower rate than other areas, but that's driven by an automation trend.

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