tool name

Monday, Oct. 26, 2009

Valley faces unique set of challenges

In many ways the Central Valley's 19 counties are a land apart.

What applies to the rest of the state often does not apply to this 25,000-square mile-region. Culturally, geographically and economically, this region runs by its own rules.

Indeed, if it were a state it would rank near the bottom nationally for per capita income yet the top for agricultural production.

So says a newly released report on the Valley's economy, which illustrates in stark numbers the Central Valley's distinct insularity. The report not only reinforces how much the Valley lags behind the state and nation in terms of income, but also illustrates the unique challenges the region faces in coming years.

The report, "Assessing The Region Via Indicators," looked at a series of economic indicators, from unemployment and transportation to agricultural productivity and housing, to see where the Valley stacks up compared to the state and nation. The Great Valley Center, the nonprofit that conducts the annual study, broke the Central Valley down into four regions and outlined the major economic forces currently at work in each.

While the region, already below many state averages, was hit hard by the recession, much of the report's findings point to the area's preexisting internal contradictions. It has some of the highest population growth, yet the widest income disparity. It has some of the state's highest unemployment rates, lowest wages and highest growth.

Merced County in particular neither ranks at the top nor the bottom when it comes to leading economic indicators. While in some cases -- unemployment and foreclosures -- Merced is near or at the bottom, in other areas it is either average or above average -- agricultural production, for instance.

The following is a brief breakdown of the study's findings.

The Valley's population is projected to double in the next 40 years, which is significantly faster than the rest of the state. The current 19 county region's population, more than 7 million, is projected to stand at roughly 14 million by 2050. Much of this growth will come because of migration.

At the same time, the region's per capita income is among the lowest in the country. In 2007, the Central Valley's per capita income, about $29,000, was 29 percent below the state average. According to the report, if the Central Valley were its own state it would rank as 48th nationally for per capita income. The Valley is also a region with some of the largest wealth disparities between the wealthy and the poor.

The north San Joaquin region, which includes Merced, Stanislaus and San Joaquin counties, has a per capita income -- hovering around $25,000 -- in the middle when compared to the rest of the region. In comparison, it only lagged behind the Sacramento metropolitan region and was on par with the northern Sacramento region when it came to income. That said, the report notes that the north San Joaquin region's per capita income jumped 23 percent from 2000 to 2007.

Housing industry statistics, as might be expected, are equally as dismal as income. New construction permits declined 404 percent in the Central Valley between 2005 and 2008. But the north San Joaquin was hit the hardest. From 2005 to 2008 construction permits decline by 853 percent.

Foreclosure rates hit the region and Merced equally hard. The Valley as a whole saw its foreclosure rate jump 43 percent in one year, 2007-2008. The north San Joaquin had the highest regional foreclosure rate, 7 percent, which is 79 percent higher than the state average.

As foreclosures increased so did the work force. In fact, the size of the work force grew faster than the jobs available, 15.9 percent to 13.2 percent. But jobs have increased. In the Merced region, for instance, job growth peaked in 2007 with a 10 percent increase from 2000 levels.

These factors as well as the failing economy only increased already higher than average unemployment levels. In 2008, the Valley's unemployment level was 42 percent higher than the rest of the state. Merced in particular gained the unique distinction of having the second highest unemployment rate in the state, 20 percent in May, after only El Centro in Southern California with 25 percent.

For those still working, wages are lower in the Valley than in the rest of the state. And the highest paid jobs -- construction, manufacturing and information technology -- have all seen declines in recent years.

Business in the Valley, especially retail sales, has experienced an up and down ride in recent years. Taxable sales jumped from more than $50 billion in 2002 to a peak of more than $92 billion in 2007. But in that period the north San Joaquin trailed every other Central Valley region in retail sales with only $7.6 billion. On a good note the south and north San Joaquin and Sacramento metropolitan region saw tourism and travel related spending increase by roughly $800 million from 2002 to 2007.

When it comes to agricultural indicators the Valley's stats are the opposite of its more negative indicators.

Indeed, if the region were a state it would stand as the nation's number one producer of agricultural, nearly 47 percent higher than the second largest producer, Texas. Agriculture in the Central Valley provided roughly 10 percent of all jobs, as is the case in the North San Joaquin region. In terms of agricultural productivity statewide, the South San Joaquin tops the list; it provides 47 percent of all the agriculture production of the state, followed by the north San Joaquin's 20 percent. Merced's agricultural production was fourth in the state in terms of yearly income -- $3 billion.

The one negative element in the report regarding agriculture is the rate in which agricultural land is being developed. From 2000-2006 more than 120,000 acres were converted for urban uses. While the sheer acres converted were highest in the Sacramento metropolitan region, the south San Joaquin Valley saw the most prized agricultural land lost: 16,000 acres.

The Central Valley still lags behind the rest of the state when it comes to the flow of federal dollars, says the report. Federal spending per capita here is 64 percent of the nationwide average. The state in contrast receives 89 percent of the national average.

The report was not all negative, in fact it recommends a series of actions. The Valley must improve the quality of its work force with job training and economic development. It also recommends the continued backing of the agricultural economic base. On top of these recommendations it added the region should diversify its economy. By supporting innovative new businesses as well as those already located here, more jobs will be created for a varied work force. The region should also capitalize on federal recovery monies to get the most for the Valley by asking for a greater portion of the funds. Lastly, it recommends that rural communities not be ignored. Their specific needs and attributes should be nurtured instead.

Reporter Jonah Owen Lamb can be reached at (209) 385-2484 or jlamb@mercedsun-star.com.