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


 

Economic OverVIEw

  • The Sacramento economy has been booming, the unemployment rate hit a historic low, and household income has increased.

  • The pace of job growth in the region has slowed partially due to stagnant labor force growth, which may slow the pace of economic growth.

  • Risks to continued growth include weak job growth in cyclical industries, competition with other counties for construction jobs, and increased labor costs.

Consumer Sentiment

  • Overall, consumer sentiment remains fairly positive but appears to be cooling somewhat.

  • While national sentiment has remained steady since our last release, regional sentiment is down for the first time since the inception of our survey.

  • Expectations regarding the future of the regional economy have fallen the most over the past year. In contrast, national data for the same period shows increased optimism for the future.

  • The data hints at potential slowing of consumer spending in the region. The share of respondents who plan to acquire mortgages, auto loans, or credit cards over the next year is down compared to previous releases.

Small Business

  • SBA lending has surpassed prior peak levels, primarily due to growth in Placer County.

  • Latest Small Business Confidence Index survey results indicate a perception of plentiful credit and widespread plans to hire; but respondents expect more challenging revenue environments and business conditions ahead.

  • Business transaction activity remains robust, but focused on smaller deals with lower valuations.

Real Estate

  • Office Market: Showed strong performance during 2018 and is well positioned for further growth in the coming year, although availability will likely be an issue long-term.

  • Industrial Market: Strong lease rate growth was driven by low vacancy. New product is scheduled to come online in early 2019 but is focused on attracting a new tenant base rather than servicing the traditional tenant base.

  • Retail: Retail fundamentals were largely driven by construction in 2018, and class A centers are seeing strong demand due to strong demographics. Landlords are looking to new, experiential tenants to try to insulate themselves from online competition.

  • Single Family: Property values continue to grow but the pace has slowed, up 5.3% year-overyear. The market is not over saturated with new supply; developers have curtailed their pace of construction to approximately 8,000 permits this year, down from a 2004 peak of 22,005.

Capital Markets & Banking

  • Last year, cautious optimism was one of our main themes for 2018; we are still cautiously optimistic for 2019, but with a little more caution and a little less optimism for capital markets and the regional banking sector.

  • Confidence on the part of the consumer and the corporation is expected to wane in 2019 as the source of future economic growth beyond 2019 becomes less clear.

  • Regional banks and credit unions have performed well, but the dwindling of cheap liquidity and a flatter yield curve present formidable headwinds.

Human Capital

  • Employee resignations are expected to slow.

  • Preparations for artificial intelligence are taking place.

  • The need for the human resource unit to be increasingly proactive and strategic is evident from trends such as generational challenges, natural disasters, and economic uncertainty.