Sacramento Business Review provides a comprehensive, precise, and
intellectually sophisticated analysis for our regional economy.


 

Economic OverVIEw

  • The Sacramento region recently experienced a decrease of the civilian labor force.

  • The pace of job growth in recent months has been at its lowest since the last recession.

  • The region had unequal job growth across different industry sectors, with construction.

Consumer Sentiment

  • Overall, consumer sentiment remains positive and is roughly flat since our January 2019 report at both the regional and national levels.

  • Though positive in absolute terms, perceptions of current economic conditions have fallen at the regional level and even more so at the national level.

  • Compared to national data, regional consumer sentiment remains less optimistic overall and less positive about current economic conditions.

  • Consumer expectations for future economic conditions are up slightly at both the regional and national level.

Small Business

  • Total SBA lending decreased, driven by a meaningful drop in Placer and Yolo Counties. A Sacramento County slowdown overshadowed El Dorado’s impressive growth.

  • SBCI respondents feel more optimistic on all areas, except credit, which remained largely unchanged.

  • Business listing activity, which is measured by volume of listings and closed sales, increased from our previous reading, though sales were still largely focused on smaller deals.

Real Estate

  • Office market: Strong start to 2019 lack of supply is pushing lease rates and property values up.

  • Industrial Market: Strong lease rate growth was driven by low vacancy and new investors entering the market. New product is coming online, but focuses on large users leaving smaller firms for few options.

  • Retail: Retail fundamentals continue to be driven by construction, and class A centers are seeing substantial demand due to strong demographics. Tenants continue to look to add experiential elements, resulting in food halls, virtual reality arcades, and the like.

  • Single Family: Property values are growing, but the pace continues to slow, up 2.8% year-over-year compared to 5.3% growth last year.

Capital Markets & Banking

  • Fed policy has done an about face from where we thought it would be at the beginning of the year. We initially projected two rate hikes for 2019, and now we are expecting that two rate cuts, with one already occurring in July, may be in store before the end of the year.

  • We still think low to mid-single digit returns make sense for equity markets, but that means the market has more to give up before year-end. Volatility observed at the end of July and into August may have already put us on the path to the returns we projected back in January.

  • The yield curve was inverted between the 3-month and 10-year for much of the first half of 2019, and the inversion continues to be a factor as of the start of Q3. If history does repeat itself, a recessionary environment may not be too far off.

  • Our proprietary SBR Financial Conditions Index shows that the regional economy continues to expand.

Human Capital

  • Increased resignations are reported, accompanied by moderate recruiting efforts, suggesting a possible shrinkage of the local workforce.

  • Training and development budgets are increasing, as organizations are conceivably trying to address existing skills gap.

  • Overall compensation (salaries/wages and optional benefits/perks) is seeing an uptick in the latter part of 2019.

  • Early 2019 reported preparing for Artificial Intelligence as a priority, with the focus shifting from preparation to implementation and training for AI.

  • The top two factors expected to exert the most influence on the overall organization are staying consistent – there is an enduring skills gap and talent shortage.