Experts say this is why Ventura County's economy is faltering

Erin Rode | Ventura

Show Caption Hide Caption A look at grim economic forecast for Ventura County Here's what the California Lutheran University Center for Economic Research and Forecasting says about the local economy.

What’s the forecast for Ventura County’s economic future? Overcast and stormy with a strong chance of economic weakness.

Over the next few years, Ventura County residents can expect declining population, decreased economic activity and poor housing affordability, according to the California Lutheran University Center for Economic Research and Forecasting.

Center Executive Director Matthew Fienup presented findings of the 2019 Ventura County Economic Forecast on Thursday at the Serra Center in Camarillo.

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“The CERF team has been perceived as less than optimistic,” said Marni Brook, CERF advisory board member and director of lending for Women’s Economic Ventures. “But they have resisted the call to be more optimistic or ‘talk up’ the economy. They have been consistent and accurate and called it as they see it.”

According to the forecast, several interrelated issues contribute to Ventura County’s weak economy, including high housing costs that push jobs and residents out of the region. As increasing numbers of residents leave the county, economic activity decreases.

“This is the economic puzzle of Ventura County: Total economic activity is declining, the labor force is shrinking, population growth is negative, and the out-migration of people from VC is accelerating, yet home prices continue to soar,” Fienup said.

Fienup noted that wildfires have exacerbated economic issues that already existed in the county.

“We were a weak economy going into the last few years of fires, and the fires didn’t help,” he said.

County could see 8 years of zero economic growth

Ventura County is currently in its fifth straight year of economic weakness, with an average economic growth of zero over the past five years. CERF predicts that this period of zero growth will continue for the next three years, resulting in eight years of zero economic growth.

“This is the worst five-year period we’ve had, including the period around the financial crisis,” Fienup said.

CERF forecasts that annual growth of Ventura County’s gross domestic product will range from 0.1% to 0.2% between 2019 and 2021. This represents a bleaker outlook than last year’s forecast, which initially predicted that growth would average 1% over the next three years.

While Ventura County’s economy continues to shrink, the U.S. economy grew 2.9% in 2018, and the state’s economy grew 3.5%.

Population numbers are ‘a punch to the gut’

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Last year, Ventura County saw negative population growth for the first time in history. Much of this is driven by worsening net domestic migration numbers, which means more people are moving out of the county than moving into it. About 4,000 more people left Ventura County in 2018 than moved in.

“This is the first time in the history of Ventura County that this has happened. It is quite striking and speaks to the status of the county,” said Dan Hamilton, director of economics at CERF. “More people are leaving than coming to Ventura County, which is telling us that households, businesses and individuals are choosing to go elsewhere to start their family or start a business.”

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CERF forecasts the county’s population will continue to decline over the next three years, and the net number of people leaving the county could increase more than 20%.

“People are comparing economic opportunity in different areas and then voting with their feet,” Fienup said. “This data point came as a punch to the gut. We were really shocked that this population decline happened for the first time in history.”

Fienup added that Thousand Oaks and Ventura lost the highest number of residents. Both cities were impacted by fires in recent years.

More jobs in education, health services & hospitality

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Overall, the county is gaining low-paying jobs while losing high-paying jobs.

According to CERF’s report, jobs in high-paying sectors of the economy will continue to decline, while jobs that can be conducted somewhere else at a lower cost will continue to leave the county. Average job growth between 2019 to 2021 is forecast to be 0.4%, with growth in the education and health services and leisure and hospitality sectors.

“Unfortunately, the average salaries in these sectors is not sufficient to cover the cost of living here, so each of these jobs could be adding another commuter on the county’s freeways crossing county lines,” Fienup said.

More than 80,000 Ventura County residents leave the county each day to go to work, while 40,000 people drive into the county from elsewhere for work.

Housing costs blamed for economic problems

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While other indicators have remained flat or negative in the county, home prices have continued to rise here. Hamilton and Fienup say this demonstrates there’s a housing supply problem, which is driving up home prices and negatively impacting the economy overall.

“A person might think that the economy is flat, so home prices must be flat or negative,” Hamilton said. In the past few years they’ve actually been rising. It is not that the economy is driving home prices; it’s the other way around. ... Median home prices are too high and causing an affordability problem.”

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While CERF expects “modest, nominal home price growth” in coming years, the increase is forecast to be less than inflation, resulting in decreasing price growth for the first time in recent years. Because people are leaving the county, Fienup noted that the overall increased home prices can’t be attributed to high demand.

“We always get questions on how we know home prices are causing the economy to go down — this shows it. There is not substantial enough demand to cause high home prices in the county; it can only be dramatically constrained supply,” he said.

Can the county change course?

CERF expects the county’s current economic trends to continue throughout the next few years, but if population growth continues to be negative, it could negatively impact other economic indicators — causing even lower GDP growth than forecast.

At the Ventura County Economic Forecast Conference where Fienup presented the data, a panel had an “honest conversation” about what the county needs to do to improve the economy. Panelists included Nick Deitch, architect with Mainstreet Architects and Planners; Penelope DeLeon, Superintendent of the Oxnard Union High School District; and Drew West, general manager of global services at the Trade Desk.

Panelists agreed that the county needs to build more housing to reduce housing costs.

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“Our fear of becoming like the San Fernando Valley is turning us into the San Fernando Valley,” Deitch said. “We all agree that this is a beautiful and tremendous place, and we all seem to agree that there’s not enough housing. We need to build more housing.”

Fienup emphasized the need for city officials to support more housing projects. The county saw a 47% decrease in home building permits between 2017 and 2018, with just 1,229 units permitted last year.

“What’s the prescription? We can’t wait any longer, we need to build more housing,” Fienup said. “It is a necessary condition, and it is incumbent on us to support elected officials who are showing political courage.”

Erin Rode covers housing, real estate and development for The Star. Reach her at erin.rode@vcstar.com or 805-437-0312.