Tale of two cities shows state of California recovery

150 150 Matthew Grant Anson

This piece was originally published on the California Economic Summit blog

As the California economy makes its slow-yet-steady ascent out of the economic downturn, it’s inevitable that some cities would be doing better than others. We present to you an Economic Tale of Two Cities, a yarn that juxtaposes stubborn stagnation in the north (Sacramento) with tempered optimism in the south (San Diego).

The main thing to take away from Sacramento’s economic future, at least according to the mid-year issue of the Sacramento Business Report, is that businesses are locked into the conservative “wait and see” approach, a strategy that is contributing to the region’s 10.8 percent unemployment number (.4 percent higher than the state’s overall dismal figure). Another victim of the “wait and see” is Sacramento’s growth rating when compared to other large metropolitan cities. The city sits at a terrible 8th from the bottom, out of the 100 largest cities.

Businesses aren’t the only ones taking the conservative approach: Sacramento’s banks are also waiting out the downturn by only loaning money to borrowers of the highest quality. While Sacramento’s small businesses can take some solace in the fact that banks are at least lending at a clip higher than in 2010, it doesn’t mean all that much when considering the fact that 2010’s lending levels were historically low. 

Unfortunately, the bad news for Sacramento doesn’t end there. The real estate market isn’t anticipated to pick up any time soon, and manufacturing continues to freefall due to the state’s reputation as a place that isn’t conducive to doing business. 

This is where the Economic Summit Action Plan comes into play. One of our Action Teams deals with access to capital, a way of investing in our businesses and communities by reducing regulatory constraints and providing incentives. This is the type of work that will help set Sacramento on the same track as its fellow California city to the south, San Diego. 

San Diego’s economic outlook is a bit brighter, according to the 2012 edition of the San Diego Small Business Outlook report. Unlike in Sacramento, San Diego businesses are actually increasing their spending, and part of this relates to a more favorable attitude towards government in relation to business. While the automotive and related industries are expecting a revenue decrease, retail is looking forward to a boom. 

Spending is expected to increase almost entirely across the board for San Diego businesses, and it’s construction firms that are anticipated to open up their checkbook the most. Probably most telling of all are the trends in confidence – there’s been a dramatic increase in confidence from 2010 to 2012 by San Diego small businesses. General contractor optimism has staged a complete turnaround and eastern suburbs of San Diego are now joining their southern and northern counterparts in increased enthusiasm and optimism when it comes to boosting spending levels.

While recovery in California is slowing rolling, it’s not enough for all of us to simply join in on the “wait-and-see.” The Action Plan has strategies designed to keep the recovery going by making the state competitive at creating jobs. In addition to the access to capital Action Team, our Action plan also is working on smart ways to streamline regulation so we can help continue San Diego’s progress by putting government in a position to facilitate growth, not stymie it.


Matthew Grant Anson

All stories by: Matthew Grant Anson