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San Diego businesses still feel recession, despite Bernanke

23 July 2010 No Comment

By Helen Kaiao Chang

See original story on SDNN

Tuesday, September 15, 2009

The recession may be technically over, but San Diego’s businesses are still feeling it.

Business leaders and economists were responding to the Federal Reserve Chairman Ben Bernanke’’s comments Tuesday that “the recession is very likely over at this point.” Bernanke also said that unemployment would likely continue to rise.

“No one’s popping any champagne corks yet,” said Ruben Barrales, president of the San Diego Regional Chamber of Commerce. “At a macro-economic level, the recession may be ebbing, but the reality is we are in a soft economy right now and business people in San Diego are still faced with tough economic challenges.”

Businesses will need more time to see a turnaround, said Alan Gin, an economics associate professor at the University of San Diego.

“Spending is going to pick up, housing sales will continue to be good, but businesses will hold back before they start hiring people again,” Gin said. “They want to make sure the economy is fully rebound before they take on more jobs. ”

The residential construction industry will continue to drag down the overall economy, said Alan Nevin, an economist at Marketpointe Realty Advisors in San Diego. While the federal government has set aside stimulus funds for this sector, it was “a drop in the bucket” for what was needed, he said.

A strong residential construction industry is critical to the economy’s growth.

“Until that industry comes back, we will not have a healthy economy,” Nevin added. “It takes time and financing, and until the lenders are willing to open up their pocket books to developers, the developers will not be able to move forward.”

USD economist Gin believes job losses will continue rising through early 2010, as San Diego businesses remain cautious.

Barrales agreed that “It will be after a number of quarters of positive economic growth that we see unemployment actually stabilizing.”

This is because small businesses still face tight credit markets, said Barrales.

San Diego’s high tech and life science companies are also still “feeling the pinch,” said Moya Gollaher, executive vice president of Connect, a non-profit organization representing San Diego’s high tech and life science industries.

“We feel like (the recession is) continuing, because ready access to capital does not exist right now in ways that we see would contribute to the robust growth of start up businesses in San Diego.”

Still, San Diego’s economy has several bright spots, experts said.

California has started to pull out of recession and San Diego has not suffered as much as other areas, due to a diversified economy, said Marketpointe’s Nevin.

“We are in particularly good shape because of the military spending that’s going on here,” he said.

San Diego’s residential real estate market is also on a rebound, with housing sales moving up in the last several months, said Nevin. The number of foreclosures on the market has dropped from half to a third of inventory in the last year, while sales and prices are creeping up, he said.

The experts also agreed that general consumer confidence still has a ways to go in San Diego.

“There are some very positive signed, but it’s still a fragile economy,” said Barrales.

Nationally, recovery is only taking place in certain states, said Nevin. States where the economy is tied to automobile and other manufacturing industries — such as Michigan, Ohio and Indiana – are still hurting badly, he said.

In San Diego, businesses remain cautious.

“We need to move cautiously, but anticipate that the economy will eventually turn around,” said Barrales.

Follow Helen on Twitter @HelenChang.

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