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The Economy’s Strongest Industries

4 May 2011 No Comment

By Helen Kaiao Chang

San Diego’s growing industries will pick up slack in the housing market, economists said. These industries include: military, biotech, tourism, healthcare, professional services and entrepreneurship.

MILITARY

War helps. San Diego’s defense industry has enjoyed a spike in recent years, due to 9/11 and war in Iraq. Even with plans to pull U.S. troops from the Middle East, as Democrats gained controlled of the House and Senate, this industry will hold strong. This is because San Diego’s defense industry has already shifted its focus: from manufacturing hardware to innovating technology and surveillance systems. This means the industry will stay busy in peacetime, said Cox.

Defense industry job numbers, according to Cox:

  • 2003: 17,000
  • 2006: 20,000
  • 2007: 20,500 to 20,600 projected

BIOTECH & TELECOMMUNICATIONS

These industries bring in moolah. It’s mostly through venture capital funds, initial public offerings (IPOs), and research grants.

VCs are have been pouring some $1 billion a year into San Diego companies in the last three years, and 2007 is expected to bring more, said Cox. About 40 percent of that money goes into biotech start-ups. Another 15 percent to 20 percent goes to telecommunication companies. When those companies grow, their Initial Public Offerings (IPOs) bring in more bucks.

Government research grants are also adding dollars. The University of California San Diego (UCSD) is now the fifth largest recipients of such grants, although it has historically been in the top 10. This money ripples out into the economy, as UCSD scientists partner with private businesses on projects.

“This is a big difference in the way our economy used to run, versus the way it’s run today,” said Cox. “We’re much more dependant on this type of funding today for the types of businesses we have. Either initial public offerings (IPOs), venture capital funds, or public/private partnerships in terms of research grants.”

TOURISM

Tourists spend money. And we have lots of them, especially from neighboring areas. The tourism industry continued to grow in 2006 and is expected to remain strong in 2007. In 2005, a record 27.2 million visited America’s finest, spending a chart-topping $5.8 billion. That number continued to rise, though moderately, in 2006.

But a downturn in the national economy will hurt San Diego’s tourism sector, said Gin.”If you see a slowdown in the national economy, our tourism will be adversely affected. People won’t travel much.” Where might new tourists come from? Said Gin: “China.”

HEALTHCARE

The growing number of retirees and seniors in San Diego is boosting the healthcare and social services industries. Not to mention other industries. “Aging people are most likely to travel and spend more, and they have the money to do it,” said Cunningham.

BUSINESS SERVICES

Professional services will continue to rise, riding on growth industries such as technology, biotech and defense. These services include accounting, legal, human resources, copying services and so on.

ENTREPRENEURSHIP

Entrepreneurs fuel San Diego’s economy.

“Our economy has done so well because of our entrepreneurial companies,” said Cunningham. “San Diego attracts people who are entrepreneurial, that like to do the high tech side, do the research and want to start their own business. That really has been a driver of our economy.”

Gin said: “It’s a growing sector and San Diego in particular has a lot more of that than in other places. You don’t have as entrenched an economy that depends on big manufacturing firms, Fortune 500 companies. The companies in San Diego tend to be smaller, there’s more of an entrepreneurial spirit.”

Current employment figures do not account for entrepreneurs – fresh and down-sized corporate guns who start new businesses. But Cunningham estimates that this group makes up some 15 percent of the total workforce.

Can entrepreneurs escape a downturn? Said Gin: “You can start your own business, but you’re going to be affected by the overall economy. If the economy goes into a slump, that’s going to affect the demand for your company’s products.”

“The small companies tend to be a little more flexible, so they may be a bit better at adapting to a slower economy. On the other hand, they don’t have the financial assets that it takes to weather a significant slowdown,” said Gin.

 

This article is part of a comprehensive economic outlook. See related stories:

  • The Housing Market
  • Growing a Basket of Industries
  • Population Changes & Employment

 

Follow Helen on Twitter @helenchang.

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