The Humboldt County Economy in 2008 By Erick Eschker Presented to Eureka Rotary Club March 31, 2008

The Humboldt County Economy in 2008 By Erick Eschker Department of Economics Humboldt State University Humboldt Economic Index

Humboldt Economic Index Sponsors

Six Sectors and Composite Energy Lumber-based manufacturing Employment Hospitality Retail Housing Composite

Is Humboldt County in a Recession? No decline in Retail or Employment Unemployment Rate up Overall Activity down due to: –Lumber Manufacturing –Housing sales

Retail Based on our own survey (we’re always looking for more data providers!) The seasonally adjusted Retail Index is represented by the blue area in the graph above. The red line shows the four month moving average which attempts to demonstrate the overall trend in the data with less monthly volatility.

Employment Very little change in overall employment Unemployment rate has risen over the year

Housing

Composite Decline since May Housing and Lumber-Manufacturing the main reason

Forecast Two local Leading Indicators show slowing

Concerns for Humboldt County Credit Crunch –“We are facing the most serious combination of macroeconomic and financial stresses that the United States has faced in at least a generation, and possibly much longer than that.” Larry Summers, Economist, ex-Harvard President (March, 2008) State Budget Cuts –$16bil deficit –Humboldt County has higher percent government workers than most counties

Concerns for Humboldt County Commercial Real Estate –“Banks with CRE concentrations should take steps to strengthen their overall risk- management framework and maintain strong capital and loan loss allowances.” FDIC Chairman Sheila C. Bair –This is potential problem for small/regional or California lenders –FDIC to hire 60% more staff for anticipated bank failures

Concerns for Humboldt County Residential Housing –New Housing & Real Estate Index Webpage

Housing What will happen to sales and prices over the next few years? More difficult to obtain a mortgage today –Stated income, down payments, teaser rates Continued drop in Demand for housing –Prices and sales will fall Humboldt County appreciation has been similar to Central Valley, Southern California, and Northern California

What are the Forecasts? Case-Shiller Housing futures contracts predict price drops of 23%, 18%, and 12% in Los Angeles, San Diego, and San Francisco over the next 4 ½ years

Foreclosures Foreclosures in Humboldt County have gone from record lows to record highs

The Humboldt County Economy in 2008 By Erick Eschker Department of Economics Humboldt State University Humboldt Economic Index